Philip Morris hit with huge fine for tax dodge

Representatives of Philip Morris (Thailand) talk to media crews following a court ruling to fine the Switzerland-based company 1.2 billion baht for tax evasion. (Photo by Apichart Jinakul)

The Criminal Court on Friday slapped a 1.2-billion-baht fine on Philip Morris (Thailand) Ltd, an importer of cigarettes and tobacco products, for evading taxes, though it dismissed a lawsuit against the company's seven local employees.

In the lawsuit filed in January 2016, the Office of the Attorney-General (OAG) charged Philip Morris (Thailand) with evading taxes by under-declaring the value of cigarettes it imported from the Philippines from 2003 to 2006. Seven Thai employees of the firm were also included in the lawsuit.

According to the OAG, Philip Morris (Thailand) set the price of L&M cigarettes imported from the Philippines at 5.88 baht, while other importers declared the same brand of cigarettes at 16.81 baht per packet. The firm also declared the cost, insurance and freight (CIF) rate on Marlboro from the Philippines at 7.76 baht per packet, far lower than the 27.46 baht reported by other importers.

Hence, the OAG said, such undervaluing of imports meant that the company managed to avoid paying over 20 billion baht in taxes. The defendants denied the charges.

The court, meanwhile, found the importer guilty of under-declaring the value of products brought into the country and ordered that it pay 1.22 billion baht as a fine, but dismissed the case against the seven individuals due to lack of clear evidence.

After hearing the verdict, Gerald Margolis, Philip Morris International's managing director for Thailand and Indochina, congratulated the Thai employees who got off. However, he said, the company will appeal the case as the World Trade Organisation had earlier ruled that Philip Morris (Thailand) had followed Thai laws related to prices and import tax declaration.