South Korea: Heineken accused of tax evasion

Heineken’s Korean business unit is under investigation of the Korea Customs Service (KCS) for allegedly manipulating original import prices of its beers to lower tax payments. Heineken is accused to undercut the prices for its own beer which is imported to South Korea in order to save on the 113 percent import tax. A report by the Maeil Business Newspaper said on Thursday that an involvement of Heineken’s Dutch headquarter cannot be ruled out.

If the allegations prove to be true, Heineken Korea could be fined with a penalty up to 10 billion won (U$8.9 million).

The investigation of Heineken could be the start of further examinations of beer importers. “There has been a suspicion of price manipulation regarding import declaration. When the KCS expands its probe to beer importers as a whole, the aggregate fine can come to hundreds of billions of won,” an industry official is quoted as saying by a report of the Maeil Business Newspaper on Thursday.

Observers believe that the examination could lead to a tax reform in Korea. Last year, the Korea Institute of Public Finance, a state-run think tank, has proposed a revision on liquor tax. (inside.beer, 20.7.2018) Up to now domestic beers are taxed on the sum of manufacturing costs, sales, marketing costs and profits. Imported beers are taxed on the import price. This creates a tax gap of up to 20% which forces even domestic companies like Oriental Breweries to produce at least part of their beers outside of the country.

South Korea is one of the countries with the highest quota of imported beers in the world. In 2017 16.7% of all beers consumed inside the country came from abroad.

 

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