Tax Evasion
The Seoul Regional Tax Office recently filed a complaint with the prosecution against Philip Morris International (PMI) Korea, which sells the Marlboro brand, and British American Tobacco Korea (BAT Korea), the vendor of Dunhill cigarettes, for tax evasion on November 30 and fined the two companies tens of billions of won in total.
According to industry sources, the two tobacco manufacturers, aware of the expected price hike beforehand, pocketed excessive profits by stocking up on products and selling them after the tax increase last year. In the process, they profited in 208.3 billion won (US$178.34 million) and evaded taxes. Accordingly, the Seoul Regional Tax Office investigated the two foreign tobacco companies from August.
The Ministry of Strategy and Finance also filed a complaint with prosecutors against Philip Morris and BAT Korea early this month for breaking the law for anti-hoarding and price stabilization in Korea.
Meanwhile, the foreign cigarette makers are presently an eyesore in the business as the tobacco price hike last year gave them large profits but they are still miserly on corporate social responsibility (CSR) activities. The net profits of Philip Morris Korea and BAT Korea rapidly grew with sales of 1.2 trillion won (US$1.03 billion) due to the price increase, but they spent less than 1 percent of their sales on CSR activities – Philip Morris Korea with 371 million won (US$317,637) and BAT Korea with 56 million won (US$47,945).