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Diageo loses South Korea import licence

Published:  23 July, 2008

Drinks giant Diageo lost its licence to import alcohol into South Korea and was fined 160,000 after tax authorities found it was involved in illegal sales to unlicensed wholesalers.

The news comes as the UK-based company and French drinks mogul Pernod Ricard face a separate investigation for allegedly raising slush funds by supplying promotional goods at up to five times their actual price, and whether the additional money was used for bribery

Diageo, which sells the Windsor, Dimple and Johnnie Walker brands in South Korea, has a 35% share of the world's fourth largest whisky market. It trails Pernod Ricard which sells Imperial, the most popular brand, and Ballantines.

The National Tax Service had been investigating allegations that Diageo salesmen sold whisky (whose import tax had been paid) to unlicensed wholesalers who then did not pay duty on the alcohol.

Diageo confirmed a "small number" of its employees in South Korea had been involved in improper transactions but said cancelling its license was "a very severe penalty which will have disruptive and costly impact on our business".

To get around the ban, Diageo will now use a third-party distributor to sell its products.

The drinks giant is still the subject of a third ongoing investigation into tax evasion relating to whether it should pay tax in the district that its headquarters is based or that its distribution centre is based.