Diageo settles Korea whisky tax evasion dispute

Diageo has finally decided to settle a six-year court battle over accusations of Scotch whisky tax evasion in South Korea.

Diageo, which operates a Johnnie Walker House in Seoul, has settled its tax evasion dispute out of court

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.