Thai police push tax charges against Philip Morris

Thai police have submitted a case to state prosecutors charging that the local arm of Philip Morris, the world’s largest cigarette maker, evaded more than $2 billion in import taxes, an allegation strongly denied by the company.

Police Col. Thawatchai Suansida said Thursday that the Department of Special Investigation, or DSI, determined that Philip Morris (Thailand) United Co. Ltd. had underreported the value of its imports and underpaid import taxes between 2003 and 2007.

The same matter, concerning cigarettes exported by a Philip Morris plant in the Philippines to Thailand, is the subject of a trade dispute.

Manila in November last year filed a complaint with the World Trade Organization claiming that Thailand’s tariffs on the cigarettes are not calculated according to internationally accepted standards. A preliminary report from the trade organization is expected to be circulated to the parties involved early next year.

The office of Thailand’s attorney-general, which received the tax evasion case on Wednesday from the police, said it will decide on Oct. 2 whether to bring it to court.

“The DSI’s allegations have no merit and simply rehash accusations first reported in the press in 2006,” said a spokeswoman for Philip Morris International’s main operating office in Lausanne, Switzerland, in an e-mail to The Associated Press.

“In fact, following a thorough review of relevant documentation over a period of almost two years, Thai Customs accepted Philip Morris Thailand’s import prices as the correct customs values. Since the outset of the investigation, the facts have been and remain that Philip Morris Thailand’s declared customs values are consistent with both Thai customs laws and the World Trade Organization Valuation Agreement,” said Anne Edwards, the company’s director for external communications.

Col. Thawatchai alleged that “The company declared lower values for costs, insurance and transportation fees in order to pay less tax,” evading an estimated 68 billion baht ($2.01 billion) in tax.

He said that Philip Morris (Thailand) had declared 5.88 baht ($0.17) as its CIF – Cost, Insurance and Freight – rate for a packet of L&M cigarettes from the Philippines while other cigarette importers declared it at 16.81 baht ($0.50) per packet. It also declared the CIF rate on Marlboro cigarettes from the Philippines during the same period as 7.76 baht ($0.23 ) a packet, lower than the 27.46 baht ($0.81) reported by other importers, the policeman said.

“We have gathered evidence from within Thailand and other countries including the Philippines, Malaysia, Indonesia and Singapore and found that they have declared a false price to pay less taxes,” Thawatchai said.

Thawatchai said 10 Thai executives have been summoned by the DSI for questioning. Police requested that the Bangkok Criminal Court issue arrest warrants for four foreign executives who did not respond to the summons. He declined to specify who the executives were or whether they fled the country.

Police were also investigating an allegation that the company declared a false value of cigarettes imported from Indonesia between 2000 and 2002, resulting in a loss of 60 million baht ($1.77 million) of tax revenue.

source: www.forbes.com

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