The National Tax Service launched a tax investigation into Novartis Korea on Monday, raising questions among industry watchers over the purpose of the inspection.

In August last year, prosecutors indicted employees at the Korean unit of Swiss pharmaceutical giant Novartis on charges of bribery, accusing them of offering kickbacks -- disguised as "expenses for attending overseas academic forums" -- to doctors in exchange for recommending its drugs.

The company is currently under trials over the rebate issue. Observers have forecast that the tax authorities would start a tax probe on Novartis Korea to find out from where the money for rebates came.

The NTS conducts regular and irregular (at-any-time) tax investigations. Without prior notice, the NTS can carry out an irregular tax inspection if the regulator secures rebate evidence through other institutions’ help or receives a report from an informant.

However, the NTS gives a prior notice of a regular tax inspection on a company, picked through random sampling among more than four taxable companies or those operating for more than four consecutive business years. The NTS can also conduct a regular tax probe if it finds illegal issues in a company’s tax and income reports.

Novartis Korea said the latest tax investigation has nothing to do with the company’s rebate trials.

“As far as I know, the latest investigation is a regular tax inspection, which is irrelevant to the rebate issue,” a Novartis Korea official said. “Our company will sincerely cooperate with the tax investigation and fulfill its corporate duty.”

hwz@docdocdoc.co.kr

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