KOREA: A six-year court battle over accusations of Scotch whisky tax evasion, which was going on in South Korea, has been finally solved by Diageo as it became an arbitrator in settling the the dispute.
The British drinks group had been accused of under-reporting the import price of its Windsor Scotch whisky, prompting the Korea Customs Service (KCS) to fine Diageo for 500 billion won (US$455m) in unpaid taxes.
The Seoul Administrative Court has since mediated a settlement between the two that will give Diageo a significant reduction on the fine it must pay, although reports from Seoul claim the exact amount “could take a few months”.
A spokesperson for Diageo said: “Diageo can confirm it has accepted a settlement proposal from the Seoul Administrative Court in Korea, in respect of litigation between Diageo Korea and the Seoul Customs Office (SCO) over the customs valuation of our Windsor Scotch whisky.
“The precise details of the settlement will now be finalised in consultation with the SCO under the direction of the court.
“This process is expected to take several months to conclude given the legal and administrative procedures necessary to complete the settlement.”
South Korea is an important market for Diageo’s Scotch whisky portfolio, in particular Johnnie Walker which opened an experiential House in Seoul in 2013.
French drinks group Pernod Ricard also butted heads with the Korean National Tax Service in October last year, when it was alleged the group had lowered its reported profits to avoid paying a higher tax bill.
