Netflix Raises Cost of Sales in Korea, Leading to National Wealth Outflow

Assemblyman Kim Young-sik "Improving ICT Market Inequality and Domestic and International Reverse Discrimination Issues"

[Image source=Yonhap News]

Netflix has been accused of remitting the money it earned in Korea to its headquarters under the name of commission fees. On the 15th, Kim Young-sik, a member of the National Assembly's Science, Technology, Information and Broadcasting and Communications Committee from the People Power Party, disclosed the results of an analysis of Netflix's reports submitted to the U.S. Securities and Exchange Commission and domestic audit reports. According to this, in 2020, Netflix Korea Corporation, Netflix Services Korea, had sales of 415.5 billion won, and the commission fees sent to the headquarters amounted to 320.4 billion won. Compared to the previous year's sales of 185.9 billion won and commission fees of 122.1 billion won, these figures increased by 2.2 times and 2.6 times respectively. The cost of sales ratio to revenue for Netflix Services Korea rose from 70.5% in 2019 to 81.1% in 2020. During the same period, the cost of sales ratio at Netflix headquarters decreased from 61.7% to 61.1%, widening the gap with the Korean corporation to 20 percentage points. Representative Kim stated, "Netflix inflated its cost of sales, causing a serious outflow of national wealth," and added, "If the domestic cost of sales ratio had been applied at the same level as the headquarters, about 83 billion won of national wealth outflow could have been prevented." He also said, "We will introduce reasonable systems to improve inequality in the information and communication technology (ICT) market and address domestic and international reverse discrimination issues."

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