Phillip Morris Korea and British American Tobacco Korea have been ordered to pay tax penalties for allegedly making excessive profits on the back of a tobacco price hike in South Korea at the beginning of 2015, according to a story in The Korea Times.
The Times said that BAT had submitted an appeal against the penalty, while PM was planning to do the same.
Quoting on Friday the National Tax Service (NTS) and the Ministry of Government Administration and Home Affairs, the newspaper said that Phillip Morris was ordered to pay 218 billion won (US$182 million) and BAT 89 billion won (US$74).
The two companies allegedly stockpiled a large inventory of tobacco products ahead of a tobacco price hike on January 1, 2015, to sell them after the price increased.
The Board of Audit and Inspection (BAI) found the two companies had evaded taxes and profited by more than 200 billion won.
Based on the audit board’s reports, in December the Ministry of Strategy and Finance filed a complaint with prosecutors against the two companies for violating Korean laws on hoarding and price stabilization.
Meanwhile, PM and BAT were said to have complained that it was unfair and discriminatory of the NTS to exclude from its initial investigation KT&G, which they claimed had reaped the biggest inventory profit from the tax hike.
The NTS is said now to be looking at the activities of KT&G.
Faced with growing public outcry, KT&G announced in April 2015 it would donate 330 billion won for social activities. The company was said to have spent 80.8 billion won in 2015 and had planned to spend 70 billion won last year.
The Korean government upset the local market on January 1, 2015, when it increased cigarette taxes by an amount that raised the retail price of cigarettes by 2,000 won to 4,500 won per pack.