Lotte Faces Massive Tax Probe in China After THAAD Decision

  • By Lee Kil-seong, Chae Sung-jin

    December 02, 2016 12:28

    The Chinese government has embarked on an extensive tax audit and safety inspection of all of Lotte Group's businesses in China.

    The scale is unprecedented and has prompted suspicions that the move comes in retaliation against Lotte's decision to hand over a site in Korea for the U.S.' Terminal High-Altitude Area Defense battery, which Beijing fears could be used to spy on its military movements.

    The Korean Embassy in Beijing said on Thursday that Chinese tax and fire safety authorities launched surprise inspections of Lotte's confectionery, chemical plants, department stores and superstores in the country earlier this week.

    The probe covers Lotte's Shanghai headquarters, as well as 150 offices in Beijing, Tianjin, Shenyang and Chengdu. Unlike previous audits that were conducted by district officials, the latest inspection is being handled by metropolitan tax authorities.

    A Lotte staffer said, "We have so many business operations in China and the tax audits are taking place simultaneously, so we're having a tough time figuring out what is going on."

    Chinese tax authorities are demanding documents and records from Lotte Confectionery's Beijing and Qingdao factories. Lotte Chemical said five of its manufacturing operations near Shanghai were audited.

    Lotte Mart and other retail operations were subject to surprise visits by Chinese fire safety inspectors. A Lotte Mart staffer said, "None of our stores have been slapped with closure orders so far, but we are bracing ourselves."

    A diplomatic source in Beijing said, "This is not the first surprise inspection by Chinese authorities, but a probe of this magnitude targeting one company is unprecedented." A Lotte staffer in Seoul said, "We're trying to determine the reason behind the inspections."

    Chinese Foreign Ministry spokesman Geng Shuang would neither confirm nor deny a connection with the THAAD spat. "I have no information about the operation of the Lotte Group in China. I suggest you contact the competent authorities for details if interested," he said.

    He added China's position on the THAAD issue "is clear. We strongly oppose the deployment of THAAD by the U.S." in Korea.

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