Argentine authorities have suspended Procter Gamble's operations in the country after accusing the household products giant of tax fraud.
The Argentinian tax agency known as AFIP late Sunday released a statement accusing the company of fraud related to imports of razors and other toiletries from from Brazil that it said were billed through a Swiss subsidiary for $138 million. The agency said the alleged operations were to get currency out of the country and hide taxable income.
It was uncertain what the agency meant by the word suspended. The company declined to comment to Reuters on whether its operations, including factories, had been halted.
PG officials say the country generates about 1 percent of company sales – roughly $800 million. It also said the country generates an even smaller percentage of total company profits.
"We don't pursue aggressive tax/fiscal planning practices as they simply don't produce sustainable results," PG spokesman Paul Fox said, adding the consumer products maker values its relationship with the country and its consumers. "We take very seriously our responsibility to abide by the laws of every country we operate in, and to contribute to the communities in which we live and work."
PG said it was working with government authorities to "more fully understand the concerns and constructively resolve them."
Procter Gamble has been operating in Argentina since 1991. It currently has three manufacturing plants and two distribution centers there.
Argentina is Latin America's third-largest economy behind Brazil and Mexico. The country's gross domestic product was $771 billion, growing at 3.5 percent, according to the CIA World Factbook.
PG's total Latin American business generates more than $8 billion in sales or 10 percent of annual company revenue.
"Global companies can't manage their profits tricking the state, evading taxes and moving currency out of the country because their irregular behaviors impede the development of the nation," said AFIP head Ricardo Echegaray.
"Our main objective is that PG pay back to the Central Bank the foreign currency that was sent out," Echegaray was quoted by Bloomberg News as saying. "And that it pays the customs' fines and the avoided taxes."
The agency suspended PG's tax identification code, although it was unclear Monday morning exactly how that could affect PG operations in Argentina. AFIP also is seeking a foreign travel ban on local company executives, Bloomberg reported.
In 2006, Downtown Cincinnati-based PG 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, Reuters reported.
Argentina has been banished from the international capital markets since its 2002 default and suffered another sovereign default in July.
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