Mexico Ramps Up Multinationals Tax Avoidance Probe

Alper and Gardner - Reuters

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October 9, 2014

In January, Mexico launched a probe of 270 companies for allegedly exploiting tax loopholes that bled income out of the country for years. This week, authorities announced plans to ramp up the investigations.

Mexico City, Mexico - Mexican authorities plan to ramp up a tax avoidance probe of major multinationals to scour for evidence of evasion, officials said this week, adding that they were already close to a deal with one company.

In January, Mexico's Tax Administration Service, or SAT, had launched a probe of 270 companies, with a focus on seven, for allegedly exploiting tax loopholes that have bled income out of the country for years.

Reuters reported last month that the world's largest household products maker, Procter & Gamble, and No. 2 toymaker, Hasbro, were at the heart of the investigation, which could cost the companies hundreds of millions of dollars.

On Tuesday, officials from the department that audits big companies said they were on the verge of a deal with one to restructure its business so it pays more income tax for prior years. They declined to identify the firm.

The authorities also said they will soon begin formal audits of six more companies, and seek authorization from SAT's director to work with the attorney general's office to look into possible tax evasion.

"There's a thin line between avoidance and evasion," Gloria Suarez, SAT's international tax administrator, told reporters in Mexico City.

If the collaboration is authorized, SAT hopes the attorney general's office will help the agency determine if the global companies and their executives have committed fraud.

Fraudulent statements to authorities about the true roles of company employees could lead to fines and prison sentences, authorities said.

The companies involved belong to sectors such as clothing, autos, food, and pharmaceuticals, officials said.

Mexico's efforts are inspired by a global push to crack down on corporate tax dodging.

The Group of 20 leading economies asked the Organization for Economic Co-Operation and Development (OECD) to review the rules on how multinationals are taxed.

Mexico, a haven for auto manufacturers and light assembly plants, has the lowest tax proceeds in the OECD, crimping its ability to spend on programs to boost economic growth and living standards.

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