The Korea Customs Service (KCS) has launched an investigation into Heineken Korea Co. for alleged manipulation of beer import prices, according to a report by the Maeil Business Newspaper on Jan. 17.
The report says Heineken Korea is expected to face a fine of more than 10 billion won (US$8.90 million).
The probe into Heineken Korea is likely to be the start of a comprehensive investigation into beer importers as suspicions have been raised that some beer importing companies evaded taxes by deliberately lowering import prices.
In this regard, the report quotes an industry official as saying, “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.”
Some analysts say the KCS’ investigation into beer importers could lead to reform of the liquor taxation structure. South Korea imposes a tax on liquors based on their prices. Beer importers pay taxes in proportion to their reported import prices, and the tariff rate reaches 113 percent.
When beer importing companies report their import prices only 100 won (US$0.09) lower, they can reduce the tax by more than 100 won (US$0.09) per 500 ml bottle of beer. Beer importers have made undue profits by taking advantage of this system.
The report quoted market analysts as saying that it was relatively easy for Heineken Korea to deliberately lower its import price because its headquarters in the Netherlands owns a whole 100 percent stake in the Korean subsidiary. The headquarters involvement in the alleged import price manipulation cannot be ruled out, it said.