British American Tobacco Vinataba (BATVJ) is being investigated for allegedly cooking its books between 2006 and 2008, police in the southern province of Dong Nai said Wednesday.
The investigation was launched after an August inspection by the Dong Nai Tax Agency found that BATVJ had signed a contract in January 2006 to purchase support services from BAT Marketing Singapore (Bat MS).
Among other things the latter allegedly provided support services like quality control of raw materials.
BATVJ, a joint venture between the London-based British American Tobacco company and the Vietnam Tobacco Corporation, is accused of listing the services' fees as part of the company's cost expenditures.
The move allowed the company to pay lower income taxes, according to the agency.
However, the joint venture failed to produce documents proving that the services had been conducted, it said, adding that the fees over the three years amounted to more than VND216 billion (US$11.07 million).
During its August inspection, the tax agency also found that BATVJ failed to meet conditions that would allow it to enjoy income tax exemption for the first two years of operation and pay 50 percent of income tax for three years thereafter.
One of the conditions for the exemption was that the company had to use at least 40 percent of locally grown tobacco by 2009.
But, in 2008, locally grown tobacco accounted for only 4.4 percent of its total raw materials, according to the tax agency.
BATVJ was ordered to pay over VND263 billion ($13.5 million) worth of overdue taxes from 2005-2008, and fined over VND91 billion ($4.7 million).