Tax service investigating liquor maker for evasion

Diageo Korea, a subsidiary of the Britain-based Diageo PLC, is under investigation by the National Tax Service for tax evasion, according to an executive at the company who declined to be identified. The alcoholic drink company is also being investigated for having unqualified or unlicensed people sell its products.
The investigations are expected to continue until the end of April.
If the company is found to have earned more than 10 percent of its total sales through unlawful channels, it will automatically lose its license to produce and distribute alcoholic drinks.
A number under 10 percent would mean a three-month suspension for the company. Losing its license would cause a major fluctuation in the hard liquor market in Korea, but a suspension is unlikely, industry watchers say.
The executive said most of the illegal sales were in regions outside the Seoul metropolitan area.
“The investigations are into sales activities in the non-capital regions,” said the executive.
One government official said, on condition of anonymity, that the British government has expressed concern regarding the investigation of the Korean government. “Tax agents in both governments are continuing to discuss the matter,” said the official.
Diageo Korea sold 600 billion won ($640 million) in spirits last year, or 34.6 percent of the domestic market.
Its key competitor, Jinro Ballentine’s, took 35.5 percent for a marginal lead in the local market.
Korea is the fifth-largest market for the British company. Main Diageo brands include Johnnie Walker, Windsor and Crown Royal.

By Hwang Young-jin Staff Writer [yhwang@joongang.co.kr]