Procter & Gamble’s Argentina ops suspended after tax fraud charge

November 3, 2014, 10:20 AM UTC
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Argentina has accused Procter & Gamble (PG), the world’s No. 1 household products maker, of tax fraud and said it suspended its operations in the South American country, according to a statement issued on Sunday by the country’s AFIP tax authority.

It was unclear what the government meant by suspended, and the company declined to comment on whether its operations had been halted.

Argentina accused the company of over-billing $138 million in imports to get money out of the country, according to the statement, which was published on Argentina’s presidential website.

“P&G funneled currency abroad and hid income that was subject to tax in Argentina,” it said.

“We have to put an end to these tricks used by international companies,” the statement added.

Procter & Gamble spokesman Paul Fox said the company is working to understand fully the allegations and resolve them.

“We don’t pursue aggressive tax/fiscal planning practices as they simply don’t produce sustainable results,” he said adding the consumer products maker values its relationship with the country and its consumers.

Procter & Gamble has been operating in Argentina since 1991 and currently runs three manufacturing plants and two distribution centers.

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.

The company, which does not break down revenue by country but does so by region, said in its 2014 annual report that Latin America contributed 10% to overall company revenue. P&G reported net sales of $83.1 billion in 2014.

Argentina has restrained access to foreign currency in a bid to retain central bank reserves, which have fallen 17% over the last 12 months to about $28 billion.

The country has been banished from the international capital markets since its 2002 default on about $100 billion in bonds, compounded by another sovereign default in July.