Argentina Suspends P&G’s Operations

Go ahead, cry a little bit for Procter & Gamble. The world's biggest FMCG company said on Monday it had temporarily suspended operations in Argentina after the country's tax authority, which has accused the company of tax fraud, said it started meetings with P&G. On Sunday, Argentina accused the company of hiding income and over-billing $138 million in imports to get money out of the country, which three years ago introduced stringent capital controls in order to protect its fast-dwindling foreign reserves.Argentine authorities have accused the household products giant of tax fraud and suspended its operations in the country.Procter & Gamble said on Monday it had temporarily suspended operations in Argentina after the country's tax authority, which has accused the company of tax fraud, said it started meetings with the world's No.1 household products maker.On Sunday, Argentina accused the company of hiding income and over-billing $138 million in imports to get money out of the country, which three years ago introduced stringent capital controls in order to protect its fast-dwindling foreign reserves.

The AFIP tax agency released a statement yesterday accusing the company of fraud related to imports 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.

For its part, P&G said it pays all the taxes it owes in every country it operates. The company says about 1% of total sales and a smaller percent of its profit are generated in Argentina. But consumer products companies like P&G are increasingly turning to sales in developing countries to drive growth.

P&G said Monday that it values “our relationship with the country of Argentina and with Argentinian consumers.”

But government officials aren't so sure.

“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.

Argentina has been banished from the international capital markets since its 2002 default and suffered another sovereign default in July.

In other news, P&G was recently victorious in a patent suit against NJ-based Clio USA in a case regarding teeth whitening strips.