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| The Heineken beer |
Heineken Korea is under investigation by the Korea Customs Service (KCS) for allegedly rigging beer import prices. Apart from Heineken Korea, the KCS said it is also probing other foreign beer brands in Korea, signaling the case could lead to a full range of investigations of imported beer companies.
According to industry sources, Heineken Korea is suspected of undervaluing its beer import prices to evade taxes. The KCS has almost completed its investigation, and is expected to impose a fine of more than 10 billion won ($8.91 million).
"Rumors had been around that foreign beer brands have intentionally undervalued their imported beer prices, and it turned out to be true through the Heineken Korea case," said an industry insider who asked not to be named.
"If other firms are found to be involved in import declaration irregularities, the KCS could widen its investigation into other imported beer brands. Then, fines could reach hundreds of billions of won."
Under related laws, beer firms pay taxes based on imported beer prices with a 113 percent tax rate in Korea. If a firm undervalues the beer import prices by 100 won in its customs, it could avoid 113 won worth of tax per 500-milliliter can when imported.
It is easier to rig the imported prices of Heineken beer since Heineken Korea is fully owned by its Holland headquarters, according to the KCS. The agency said it will look into whether the Holland headquarters knew it beforehand and if it was involved in the irregularities.
Industry insiders also point out the current tax laws are unfair to domestic beer companies.
Under related laws, domestic firms are required to pay twice as much taxes than imported beer because their marketing expenses are also levied on taxes.
If the cost price of domestic and imported beers are the same at 500 won for a 500-milliliter can, imported beer is required to pay 565 won worth of taxes while a domestic product is levied 1,130 won.
Due to such unfair tax laws, not only local beer breweries but also whisky producers are rushing to outsourcing their production bases abroad.
Oriental Brewery, or OB, which is owned by global liquor giant AB InBev, produced its most popular beer product Cass in the U.S. and imported it to Korea during the 2018 Russia World Cup.
