Mexico eyes seven multinationals in tax avoidance probe

MEXICO CITY Thu Jan 23, 2014 3:31pm EST

MEXICO CITY (Reuters) - Mexico is probing seven multinational companies, most of them American and some listed, to investigate whether they avoided paying their taxes amid an international crackdown, a top government tax official told Reuters.

Oscar Molina, who lead audits of big companies at Mexico's tax collection agency SAT, said the seven firms, which cannot be identified for legal reasons, include Fortune 500 companies in the automotive, mining and retail industries.

The majority are U.S. firms and are part of a pool of 270 multinationals that the agency has flagged for possibly skirting their tax obligations by shifting profits to countries with lower taxes despite having a big presence in Mexico, Molina said.

The companies are cooperating with the probe and are providing information on their tax structures to the agency, he said.

"It matters a lot to us that these companies change their structures to structures where the taxes they pay in Mexico are exactly right," Molina said in an interview conducted on Wednesday.

The move is part of a Group of 20 nations (G20) effort to rein in "aggressive fiscal planning" where multinationals exploit gaps and mismatches in international tax rules to lower their tax burdens.

The effort could help boost the tax take in Mexico, which has the weakest tax revenues in the 34-nation Organization for Economic Co-operation and Development (OECD), due to elusion, evasion and a small tax base.

A global financial integrity study released in December shows crime, corruption and tax evasion drained $462 billion from Mexico's economy in 2011, trailing only China and Russia.

Molina said the informal probe of the seven firms should be completed in the next four months, at which point authorities will decide whether to go ahead with formal audits.

"We could come to the conclusion that the (companies')structures are correct and do not have to do with aggressive fiscal planning, or ... decide that they are conducting the practices identified by the OECD."

Offending firms would then either need to pay back taxes and possible fines or fight the allegations in court.

Mexico passed a fiscal reform last year imposing new taxes on the wealthy and levies on junk food, but the measure is expected to boost government revenue by just over 1 percent of gross domestic product this year.

(Reporting By Luis Rojas and Alexandra Alper. Editing by Michael O'Boyle, Simon Gardner and Cynthia Osterman)

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