K-pop groups Exo and NCT’s label SM Entertainment ordered to pay US$18 million after tax audit as founder comes under scrutiny
- SM Entertainment has been told to pay US$18 million to tax authorities after a special investigation
- Company founder Lee Soo-man was put under scrutiny, and it isn’t the first time he’s been investigated
SM Entertainment, the giant K-pop company that’s home to popular acts such as NCT, Exo, Red Velvet and Aespa, has been ordered to pay 20.2 billion won (US$18 million) to the South Korean government after an investigation into its taxes.
On Friday, it was revealed after an investigation headed by the Seoul regional office of South Korea’s National Tax Service that SM would have to pay the amount by March 31. The amount represents about three per cent of the company’s net worth.
SM said that while it would pay by the deadline, it planned to file an appeal later. It in unclear whether the payment is a fine or back taxes.
The investigation was part of a large-scale special probe beyond typical tax audits into the outflow of company capital, primarily involving transactions relating to company founder Lee Soo-man.
In 2019, similar concerns from shareholders regarding money earmarked for Lee resulted in a significant corporate restructuring. This resulted in Lee’s relative, Lee Sung-soo, taking on the role of CEO. Lee Soo-man hasn’t formally headed the company as CEO for several years, but is still recognised as the top decision maker and executive producer.
The senior Lee is considered one of the major founders of the current K-pop scene. SM Entertainment, which he founded in 1995, laid the foundation for much of the industry and its artists. In 2003, it was reported that Lee made it onto Interpol’s radar due to embezzling from SM in its early days. He was found guilty of the crime in 2004, but the decision was ultimately set aside and the finances settled. That same year, SM launched its widely successful group TVXQ.
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This is the third time SM has undergone a major tax investigation, following probes in 2009 and 2014 that resulted in the company paying several million dollars to the South Korean tax services.
SM’s tax bill is the largest levied so far on a K-pop company. In 2019, YG Entertainment had to pay six billion won (US$5.3 million) after a tax investigation.
