According to a report by South Korean media outlet Business Korea on July 28th, the Supreme Court of South Korea has ruled that Philip Morris Korea (PMI Korea) evaded nearly 100 billion Korean won in taxes by simulating wholesale sales of cigarettes stored prior to the increase in cigarette taxes in 2015.
The Supreme Court's second division announced the overturning of the initial ruling on a special consumption tax dispute case brought by PMI Korea against the National Tax Service, in which the company requested a refund of taxes. This case has now been re-submitted to the Suwon High Court.
Initially, cigarettes were not subject to special consumption tax. However, with the revision of the Special Consumption Tax Law in 2014, an additional tax of 594 Korean won was imposed on each pack of cigarettes, and the cigarette consumption tax increased from 641 Korean won to 1007 Korean won. As a result, the price of cigarettes increased from 2500 Korean won to 4500 Korean won in January 2015.
Philip Morris Korea company is expected to experience growth until now. In the period from September to December 2014, the company established temporary warehouses and manipulated its computer systems to accumulate approximately 191 million cigarette packs. This was done to create the illusion that the products were sold to wholesalers before the end of 2014, thus avoiding any subsequent price increases.
The National Tax Service (NTS) has found that Philip Morris Korea Company sold its stock of cigarettes to wholesalers at inflated prices after January 2015, manipulated sales records to make it seem like the sales occurred earlier in order to evade subsequent increases in special consumption taxes. As a result, the company has been taxed 99.7 billion Korean won (equivalent to approximately 77.8 million US dollars).
Philip Morris Korea Company has lodged a protest against the decision made by the National Tax Service, and subsequently filed a lawsuit after their objection was dismissed by the Tax Court.
The company's argument was accepted in both first and second trials, as they believed the disputed cigarettes were actually shipped to wholesalers in 2014, before the specific excise tax was imposed.
However, the Supreme Court considers the temporary warehouse of Philip Morris Korea as a temporary measure aimed at accumulating more inventory before the price increases, in order to profit from the price differentials in the future.
Court rules:
Even though the computer system shows cigarettes being sold prior to the tax increase, the excise tax should still be based on January 1, 2015, when the cigarettes were actually transported from temporary warehouses to wholesalers.
Reference:
[1] Philip Morris Accused of Tax Evasion Following Cigarette Price Increase
Disclaimer
This article is provided solely for professional research, industry discussion, and informational purposes. Any references to brands, companies, products, technologies, or policies are made for factual reporting and analytical purposes only, and do not constitute endorsement, recommendation, promotion, or advertising by 2Firsts.
Nicotine-containing products, including but not limited to cigarettes, e-cigarettes, heated tobacco products, and nicotine pouches, carry significant health risks. Readers are responsible for complying with all applicable laws and regulations in their respective jurisdictions, including age restrictions and access limitations.
The information contained in this article should not be regarded as investment, legal, medical, regulatory, or commercial advice. While 2Firsts strives to ensure the accuracy and reliability of its content, it does not assume liability for any direct or indirect loss arising from errors, omissions, inaccuracies, or reliance on the information contained herein.
This article is not intended for individuals below the legal age for accessing tobacco or nicotine-related information in their jurisdiction.
Copyright Notice
This article is either original content produced by 2Firsts or content reproduced, translated, summarized, or adapted from third-party sources with attribution where applicable. The intellectual property rights of the original content remain with 2Firsts or the respective original rights holders.
No individual or organization may copy, reproduce, distribute, republish, modify, translate, or otherwise use this content without prior authorization. Any unauthorized use may result in legal action.
For copyright-related inquiries, corrections, or removal requests, please contact: info@2firsts.com.
AI-Assisted Translation and Editing Notice
Portions of this article may have been translated, edited, or reviewed with the assistance of artificial intelligence tools to improve efficiency and readability. Due to the limitations of AI-assisted translation and editing, discrepancies, omissions, or inaccuracies may exist when compared with the original source.
Where applicable, readers are advised to refer to the original source for the most complete and accurate information. If you identify any errors or believe that any content infringes upon your rights, please contact us at info@2firsts.com, and we will review and address the matter promptly.
