Procter & Gamble shut down in Argentina for alleged massive tax fraud scheme
Friday, January 15, 2016 by: J. D. Heyes
A recent statement issued by Argentina’s taxing authority, the Federal Administration of Public Revenue (AFIP), announcing the action was unclear as to what exactly was meant by “suspended,” and Reuters said that P&G refused to comment on whether or not its operations had actually ceased.
The government is accusing the mega-corporation of over-billing $138 million in imports in order to move money out of the country, the statement — published on Argentina’s presidential website — said.
“P&G funneled currency abroad and hid income that was subject to tax in Argentina,” said the statement.
“We have to put an end to these tricks used by international companies,” the statement continued.
Paul Fox, a spokesman for P&G, said the company was currently in the process of trying to fully understand the allegations against it and is working to resolve them.
Pressured in the past by the Argentine government
“We don’t pursue aggressive tax/fiscal planning practices as they simply don’t produce sustainable results,” he told Reuters. He also said that the company very much values its Argentine relationship and the country’s consumers.
Procter & Gamble has been operating there since 1991, reports said. Currently, P&G operates three manufacturing plants in Argentina and a pair of distribution centers.
Reuters further reported:
In 2006, Cincinnati-based P&G bowed to pressure from the Argentinian government and froze prices of 31 products including shampoos, soaps and cream for at least a year in an effort to help the government combat inflation.
In its 2014 annual report, Procter & Gamble — which does not break down its revenue by country but rather does so by region — said that Latin America accounted for 10 percent of the company’s overall gross revenues. During the reporting period, P&G said it had recorded $83.1 billion in net sales.
Argentina, which is led by often-embattled President Cristina Fernandez de Kirchner, has, in recent weeks, restricted access to foreign currently, in an attempt to retain its central bank reserves after they fell 17 percent over the past 12 months, to around $28 billion.
The country was banished from participating in international capital markets after defaulting on nearly $100 billion in bonds in 2002. That default was compounded by another, this one under de Kirchner’s tenure, in July, so it stands to reason that the country would be doing all that it can to collect as much revenue as possible.
“Our main objective is for P&G to return to the Central Bank the diverted funds and pay the customs penalties and the tax on the earnings that was avoided by the price manipulation,” said AFIP chief Ricardo Echegaray, as quoted by Agence France-Presse (AFP). “We have got to put an end to multinationals using harmfully plotted out tax maneuvers” that hurt Argentina’s and other national governments, Echegaray added.
P&G guilty of other corporate abuses
The government has accused P&G of an act of “aggravated contraband,” claiming that the corporation was including “royalties” and other expenses of “intercompanies” in the price of some of its goods imported from Brazil.
The total cost of more than 2,600 scrutinized operations investigated by the tax authority amounts to about $138 million, AFIP said.
Naturally, this is far from the first time that P&G has been in hot water with authorities or had simply done something unethical. Here are just a couple of examples:
— The company has a long and gruesome history of using animals to test its products. Further, the company has essentially been lying for years that it is moving away from such testing.
— In 2008, the Food and Drug Administration warned the company against making false marketing claims for its Vick’s Early Defense Foaming Hand Sanitizer, noting that the agency had yet to approve the product as safe.