Pepsi China Accused Of Smuggling And Tax Evasion

March 29, 2010 | Print | Email Email | Comments | Category: Law & Order

PepsiCo (China) Limited, along with two of its employees, has been accused of smuggling and evading taxes on Kola nut imported into China.

According to the indictment filed to Guangzhou Secondary People's Court, Pepsi employees Huang Xuyi and Lin Dong used an incorrect code for the Kola nut they imported from McCormick & Company in the United States to avoid the company paying the full tax.

It is said that when Huang submitted materials to the custom department for the import of Kola nut (Cola Acuminata B) from McCormick, he noticed that the goods series number provided by the American supplier was 1302 for which the tax rate is 20%, while in the materials PepsiCo was going to file to the customs the code was 3302 for which the tax rate is 15%. Huang confirmed that the correct code should be 1302 after he checked the relevant rules, but he reported to Lin, who was then a principal at the outsourcing department, about the incorrect code, and was told by Lin, who was reportedly passing a message from Wang, the outsourcing manager of PepsiCo, to use the wrong code as this will save the company money. Huang did as he was told.

To cover their misconduct, Lin asked his subordinate to contact the American supplier to delete the code 1302 from the original invoice, but for some reason this was not done. Then the two sides agreed to add the code 3302 to the invoice.

All this was discovered by the customs department. The latter found that from April 2005 to September 2007, PepsiCo imported 117,000 tons of Kola nut from the United States, evading a total of over CNY1.11 million in taxes.

Local media reports that PepsiCo has been engaged a series of misconducts in China since last year. Following a bribery case and a quality problem with its products, it was recently brought to court by its partner China Tianfu Cola Group in Chongqing before this smuggle accusation came out.

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