‘Inventory profit’ being looked at

South Korean tax authorities are investigating whether or not foreign tobacco companies failed to pay the correct amount of taxes on cigarettes sold following a tobacco price hike last year, according to a story in The Korea Times quoting ‘industry sources’.

The Korean government levied an excise increase on January 1, 2015, that raised the prices of cigarettes by 2,000 won ($1.79) to 4,500 won per pack.

The Times said that cigarette manufacturers could have made tens of millions of dollars in ‘inventory profit’ by keeping products shipped out before 2015 in stock and selling them after the tax hike.

According to the Times’ sources, the National Tax Service (NTS) has been conducting an extensive tax probe into the foreign tobacco companies. The NTS was said to be investigating their failure to have paid the taxes due or their hoarding of cigarettes.

An NTS official refused to confirm such a tax probe, citing an office policy that it cannot “comment on a tax audit into a specific taxpayer”.