The National Tax Service (NTS) has fined the Korean unit of French whiskey maker Pernod Ricard 10 billion won for tax evasion, sources said Friday.
Sources said the tax authority was considering asking the prosecution to charge those responsible, including Pernod Ricard Korea CEO Jean-Manuel Spriet.
The tax agency found that the whiskey maker inflated costs for advertisements and other transactions so it could report lower profits and thereby avoid taxes, the sources said.
The NTS refused to confirm the report.
The latest scandal is another blow to the company, which already suffers from declining whiskey consumption in Korea because of the prolonged economic slump.
Pernod Ricard Korea's operating profit plunged 73.6 percent year on year in its 2013 fiscal year that ended in June, according to its report to the Financial Supervisory Service (FSS). It posted an 8.9 billion net loss on sales of 124.7 billion won, down 4.6 percent.
Pernod Ricard Korea officials were not immediately available for comment.
The NTS investigated the case for nearly six months. The company had allegedly overstated spending on advertisements and promotional campaigns between 2009 and 2013 so it could report an operating profit lower than it really was.
The company reported to the tax agency that cumulative spending on advertising and promotional events during the five years reached 506.6 billion won, accounting for 31 percent of its sales or 1.629 trillion won.
The figure is nearly double the advertising and promotional spending of Diagio, Korea's No. 1 whiskey maker by market share, during the same period ㅡ Diagio spent 280 billion won.
Pernod Ricard Korea's domestic sales have declined since the 2010 fiscal year, despite aggressive sales and marketing campaigns. The company reported 351.3 billion won in sales in 2010. This slipped to 333.7 billion won the following year and to 324.2 billion won in 2012. Last year, annual sales fell below 300 billion won.
In June, the company planned to lay off high-paid staff in a cost-saving drive, but withdrew the plan amid a fierce backlash from unionized workers.