By Park Si-soo
Staff Reporter
Prosecutors are investigating British American Tobacco Korea (BAT Korea), the largest foreign tobacco company in the country, for alleged tax evasion and illegal lobbying of tax officials to cover up the illegalities.
BAT Korea had evaded taxes by omitting its profits worth more than 100 billion won ($100 million) between 2001 and 2005 in its report to the National Tax Service (NTS), according to the Seoul Central District Prosecutors' Office.
``We've started this investigation on suspicion that the company had lobbied tax officials for one year from December 2005 when the Seoul Regional Tax Office's investigation into the company was underway,'' said a prosecutor in charge of the case. The prosecution is also looking into whether there was any more tax evasion than previously known.
According to the prosecution, the regional tax authorities found that the tobacco company had excluded its profits worth 108 billion won from its report by manipulating its production costs. The agency also found that the company issued 69 billion won worth of false tax receipts between 2001 and 2004.
In response, NTS imposed 57 billion won in punitive taxes on the tobacco company in December 2006. The actual tax levy took place one year later in December, 2007 due to BAT's complaints.
But an informer's petition filed in March 2007 with NTS called for additional tax inspection of the tobacco firm. The unidentified informer alleged that BAT Korea evaded more taxes than the amount previously reported by utilizing its overseas branches and thus NTS should levy additional 70 billion won on the company.
According to the prosecution, however, the petition was withdrawn in one month. Reportedly, a former NTS official, now working at an accounting firm, played a pivotal role in lobbying tax officials to withdraw the petition.
``We did not evade taxes,'' Yea Sung-hee, spokeswoman for BAT Korea, told The Korea Times. ``The seemingly punitive tax imposed on BAT was generated by a newly revised tax law in 2006. The government retroactively applied the new regulation to the benefit made between 2001 and 2005.''
This case is currently under examination at the National Tax Tribunal.