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Philip Morris and BAT charged of a$190 mn tax evasion in Korea

Collected: 2016.09.23

Distributed: 2016.09.26

Source: Go Direct

Two foreign tobacco majors Philip Morris Korea and British American Tobacco (BAT) Korea are charged of underreporting and evading taxes by the Korean government and could face multi-million-dollar fine on top of coughing up unreported income.

According to the Board of Audit and Inspection of Korea (BAI), the two tobacco manufacturers hoarded stocks ahead of the universal 80-percent hike on prices of tobaccos sold in Korea and profited in billions of won by selling them at nearly the double the price. The state watchdog accused the two makers of evading 208.3 billion won ($189 million).

The BAI will file charges and propose tax authorities to collect the due taxes on top of penalty from Philip Morris Korea and BAT Korea. The two deny any wrongdoing and are said to be mulling legal actions should the Seoul government demand such levy. Philip Morris could be slapped with a tax bill of up to 230 billion won and BAT 55 billion won.

The Ministry of Strategy and Finance banned hoarding from September, three months before the retail prices went up by nearly double.

Philip Morris Korea and BAT Korea intentionally held back supply of 106 million packs and 24 million packs, respectively, until late 2014 right before the price hike. They unleashed their stock when the hike went effective on Jan. 1 last year and saved tax payment that should go to the central and local governments.

The two will likely fight the matter in the court as they could face criminal charges on top of the fines.

By Kim Sung-hoon

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