Argentina suspends operations of US consumer goods giant

Procter & Gamble Argentina is accused of tax fraud and capital flight.

Argentina suspends operations of US consumer goods giant

World Bulletin/News Desk

The national tax agency on Sunday suspended Procter & Gamble from doing business in the country on accusations that the U.S.-based consumer goods maker committed fraud to send dollars abroad.

The agency said P&G Argentina overbilled by $138 million its imports of mostly diapers, personal hygiene products and shaving blades and razors.

These and other products came in from Brazil but payment was routed through a trader in Switzerland, an operation that allowed P&G to get dollars out of the country and pay less in taxes.

“Our main goal is for P&G to return the dollars taken out of the country to the central bank and to pay customs penalties and the income tax that was evaded by manipulating transfer prices,” Ricardo Echegaray, the chief tax collector said in the statement.

“We must end this cheating by international companies,” he said, adding that this strips the country of funds for education, health, public services and other services.

P&G Argentina also failed to declare imports of $19 million in its filings, the tax agency said in a statement.

The company, which is known for global brands like Duracell, Gillette and Pampers, could not be reached for comment.

The tax agency said it has presented its accusations to the courts along with a request that the P&G Argentina’s managers be barred from leaving the country until the case is resolved.

It also said that it informed the customs and tax authorities in Brazil and Switzerland of the case, and sent the information to the U.S. Securities and Exchange Commission via the U.S. embassy in Buenos Aires.

The administration of President Cristina Fernandez de Kirchner has been stepping up the fight against tax dodging and capital flight to boost tax collections and rebuild foreign-currency reserves after a three-year decline to $28 billion from a record of nearly $53 billion in 2011.

The decline in dollar reserves is putting at risk a main source of funds for servicing the national debt, paying for imports to sustain economic growth, and to finance a fiscal deficit now surpassing 4 percent of gross domestic product.

Unlike most countries, Latin America’s third-largest economy cannot borrow on international capital markets to ease its need to dip into the reserves because of legal claims by creditors for more than $15 billion from bonds left over from a $100 billion bond default in 2001. The creditors could seize the proceeds of a bond sale on foreign capital markets.

The drop in the reserves has spawned a more fervent search for tax cheats, with 17 people caught after the agency tracked their travels to a boxing match in Las Vegas earlier this year. Others were busted when traveling to the World Cup in Brazil, and more than 4,000 companies and individuals were found to have undeclared bank accounts with HSBC in Switzerland.

The government needs to find more money to cover public spending that official data shows is growing 40 percent a year, faster than the 30 percent pace of tax collections.

 

Last Mod: 02 Kasım 2014, 23:15
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