Diageo bedeviled by tax fine, probe, suit

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Diageo bedeviled by tax fine, probe, suit

Diageo Korea, the nation’s largest liquor importer, is fighting a battle on two fronts as it has been made subject to an investigation by tax authorities while also engaging in a legal tussle with the customs office.

The company also serves as the local distributor of the British multinational alcoholic beverages maker.

Agents from the National Tax Service visited its headquarters in Gangnam District, southern Seoul, on Thursday afternoon after the company’s move to raise the prices of its whiskey products, including Winsor and Johnny Walker, by up to 5.5 percent from today.

However, the liquor importer has been downplaying the tax probe, insisting that it is nothing more than a regular inspection and unrelated to the price hike.

The last time Diageo Korea was investigated by the tax agency was in 2007.

However, it comes at a sensitive time as the importer is legally challenging the customs office over cumulative penalties of 400 billion won ($353.5 million) dating from 2009.

In January, the customs office levied a 216.7 billion won fine on suspicion that Diageo Korea evaded taxes by falsely representing the import prices of its products. This led to the largest fine of its kind in Korea to date. The company also has yet to pay a 194 billion won fine applied in 2009 for similar reasons.

The importer has allegedly been bringing in whiskey at prices roughly 50 percent cheaper than other competitors such as Pernod Ricard Korea.

The claim that the importer dodged taxes developed from a bribery scandal in which one of the employees of the customs office who was in charge of overseeing the liquor importer was caught accepting 100 million won from the company. This sparked the inquiry.

By Lee Ho-jeong [ojlee82@joongang.co.kr]
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