The Dong Nai Tax Agency has ordered British American Tobacco - Vinataba (BATVJ) to pay over VND263 billion (US$13.5 million) worth of overdue taxes from 2005-2008.
The joint venture between the London-headquartered British American Tobacco and Vietnam Tobacco Corporation, set up in 2002, was also fined over VND91 billion ($4.7 million), the agency said.
According to Dong Nai Tax Agency, BATJV was allowed to enjoy income tax exemption for the first two years of operation and pay 50 percent of income tax for three years thereafter, if they met certain conditions.
The conditions were that the company should be using at least 40 percent of locally grown tobacco plants for operations by 2009.
They were required to set up contracts to buy from Vietnamese tobacco farmers, according to the agency.
However, an agency investigation last month found that the company did not buy tobacco leaves from farmers but from local companies.
In 2008, the company spent VND126 billion out of VND2.8 trillion on locally grown tobacco. This amounted to 4.4 percent instead of the committed 40 percent, it said.
BATJV also failed to teach farmers modern techniques for growing tobacco as committed, except for a VND2.7 billion ($143,737) project in 2008 to train farmers and technicians, the agency said.
The tax agency has reported the case to the Dong Nai People's Committee. A source told Thanh Nien that BATJV has also lodged a complaint with the provincial authorities about the agency's decision.