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Foreign Tobacco Companies Subject to Tax Audits

Posted April. 19, 2005 23:05,   


The National Tax Service (NTS) is carrying out tax audits on Korean subsidiaries of foreign tobacco companies.

According to the tobacco industry on April 19, the NTS carried out tax audits of multinational tobacco companies Philip Morris (PM) and Japan Tobacco International (JTI) from last year to January this year.

The National Tax Service is also planning to start tax audits on the Korean subsidiary of British American Tobacco (BAT) within the first half of this year.

PM, famous for “Marlboro,” BAT, which produces “Dunhill,” and JTI, well-known for its “Mild Seven” brand, are the three major international tobacco companies in Korea.

One BAT official said, “Though no specific schedule has been announced, I heard the Seoul Regional Tax Office will hold a regular tax audit as early as in the first half of this year.”

The official added that “after the BAT Korean office was established in 1988, there was an audit through the district tax office in 1998, but this is the first time it will be investigated by the Seoul Regional Tax Office.”

It was confirmed that PM Korea had been audited by the Seoul Regional Tax Office from April to July last year.

JTI Korea was also subject to a tax audit, which is carried out every five years, from December of last year to the end of last January.

The two foreign tobacco companies are known to have been subject to a regular tax audit held every five years, and the Korean tobacco company KT&G was also investigated last July as part of this audit.

The tobacco industry is also speculating that the recent tax audit is related to the government’s determination to strongly crack down on illegal profits earned through foreign capital.

According to the Korea Tobacco Association, the market share of the three major global tobacco companies in Korea rose 4.9 percentage points from 22.5 percent as of the end of January 2004 to 27.4 percent at the end of March this year.

Eun-Woo Lee Hyo-Lim Son libra@donga.com aryssong@donga.com