Argentine government suspends P&G’s operations

The government released a statement through its AFIP tax authority on Sunday, saying it is investigating the company over-billing on $138m from imports in an effort to channel money out of the country, which has suffered from a volatile economy for a number of years.

According to experts in the field, the tax authority’s statement on the matter is ambiguous as to whether or not the company can continue to do business in the country, and thus far P&G has refused to make any official comment on the matter.

P&G had a turnover in the region of $84 billion dollars in 2013, and although it does not list revenue by country, the Latin American region accounted for approximately 10% of those global revenues.

Argentina revenues small by comparison​

Although the company’s turnover in Argentina is fractional in the global context, the company has been experiencing sliding revenues on the back of an overstretched brand portfolio, so the fraud investigation is not the best timing.

Restructuring of that portfolio is currently underway, with the company recently exiting the pet care category, but for the most recent quarter ending in July, the company’s results showed revenues sliding 1% to $20.16bn, an all too familiar story for the company in the past year.

The incumbent president, Cristina Fernández, also posted an official release on the presidential website, which stated that the company had funneled money out of the country.

Government crack down​

"P&G funneled currency abroad and hid income that was subject to tax in Argentina. ​We have to put an end to these tricks used by international companies," the government stated on its website.​

The Argentinian economy has performed poorly in recent years off the back of a significant debt burden that the country has been struggling to pay off, having recently defaulting on a debt payment of $1.33bn to a group of hedge fund providers.

In turn, the government has been targeting corporate tax evasion as one strategy to try and reinvigorate its economic performance and plug the debt gap.