[Intl-tobacco] BAT Urges S. Korea to Grant Tax Break Amid Anti-Smoking Drive

[Robert Weissman]

BAT Urges S. Korea to Grant Tax Break Amid Anti-Smoking Drive
by Yoolim Lee
Source: Bloomberg News, 2002-03-13 Seoul, March 13 (Bloomberg) --

British American Tobacco Plc, the second-largest cigarette maker,
said it may consider taking legal steps if the South Korean
government turns down its demand for tax breaks on its 100 billion
won ($76 million) plant.

BAT is urging Korea to designate the plant -- to be completed in
June 2003 -- as a foreign investment area, a move that will save the
company 7 billion won ($5.3 million), according to Kwon Dae Joong,
corporate affairs director at BAT's Korea unit. The foreign
investment area grants a company seven years of corporate tax
exemption, another three years of 50 percent corporate tax exemption
and zero tariffs on equipment imports.

The government must choose between granting tax breaks, which may
spark public criticism about the consistency of its policies, or
risk questions from foreign investors about its commitment to
attracting overseas capital to create jobs and help boost economic
growth.

``The government is reluctant to grant tax breaks because it would
go against its ongoing anti-smoking campaign,'' Kwon said. ``We'll
consider legal steps if we have to because we don't want any
discrimination because of the industry we are in.''

BAT's consideration comes as the government raised cigarette taxes
and banned cigarette sales at restaurants and bars, and companies
prohibited workplace smoking in a widening anti-smoking drive in
Korea.

``The chances (of granting tax benefits to BAT) are very slim,''
said Kim Jung Hwan, an official of the Commerce, Industry and Energy
Ministry's foreign investment policy bureau.

The ministry's foreign investment committee approving tax breaks is
scheduled to meet to review BAT and other companies in April, Kim
said.

Shares in Korea Tobacco & Ginseng Corp., the nation's cigarette
monopoly, have fallen 18 percent this year, compared with the
benchmark Kospi's 24 percent gain.