* Government faces sluggish tax collections in 2013
* Batista's MMX says fine 'has no basis,' vows fight
* Cosmetics maker Natura receives fine, shares drop
By Guillermo Parra-Bernal and Alonso Soto
SAO PAULO, Jan 8 Brazil's tax agency has in
recent weeks slapped more than $3 billion in fines on leading
companies which it says owe back taxes, in what some experts
describe as an aggressive play for cash as the government
struggles to meet its budget targets.
Shares of Brazilian miner MMX Mineração SA, owned
by Brazilian billionaire Eike Batista, and cosmetics producer
Natura Cosmeticos SA tumbled on Tuesday, hours after
both companies said they had been notified by the agency of
alleged tax infractions.
The Receita Federal tax agency is seeking 3.8 billion reais
($1.87 billion) from MMX and 627.8 million reais from Natura.
In recent weeks, the agency also fined pulp producer Fibria
SA and logistics company Santos Brasil Participações
SA a combined 2 billion reais.
The fines come at a time when the government of President
Dilma Rousseff is scrambling to plug budget holes and maintain
the fiscal discipline that helped Brazil win the confidence of
investors over the past decade.
Brazil's economy likely grew less than 1 percent last year,
much less than expected when Rousseff prepared the 2012 budget.
The left-leaning president also announced a wave of targeted tax
cuts throughout the year to try to stimulate commerce.
"We see a tax collection effort from the government because
tax revenues are dwindling," said Flavio Serrano, senior
economist with BES Investimento in Sao Paulo. "Anything that you
can get at this moment in back taxes helps out."
A spokesperson for the Receita Federal said the fines were
part of the agency's "routine work" and declined to comment on
specific cases, citing ongoing investigations.
Brazil's tax code is by far the world's most complex,
according to the World Bank. Individuals and companies often
complain that overlapping and ambiguous taxes make accounting
errors easy, exposing them to fines.
The tax agency, known as "the lion" for its official emblem
as well as its ferocious pursuit of tax dodgers, has been a key
ally in Rousseff's drive to hike revenues and meet hefty primary
budget surplus targets. The primary surplus, or revenues minus
expenditures excluding debt payments, is seen as a key measure
of the country's ability to repay its obligations.
The government demanded a record 109 billion reais in unpaid
taxes from individuals and companies last year. Some of those
accused of underpaying are global giants like iron ore miner
Vale, which is partly owned by the government.
However, the agency's reach was limited last year. The
government missed last year's primary surplus target of 139.8
billion reais by a long shot and risks not meeting its goal
again in 2013.
NO LEGAL BASIS
MMX Mineração SA faces a potential fine for paying less in
income tax than required since 2007, according to a securities
filing on Tuesday.
MMX, based in Rio de Janeiro, said the fine has no legal
basis, and hopes it will be reversed. The value of the fine,
which is equivalent to about 80 percent of the company's current
market value, has not been provisioned and has no immediate
financial impact, MMX said in a securities filing.
Shares of Natura tumbled 4 percent to 55.55 reais, the
biggest intraday decline in the stock since last Aug. 30. MMX
fell more than 4 percent in afternoon trading on Tuesday,
extending a 35.5-percent drop in the past 12 months.
According to a securities filing, Natura on Monday received
two notices from the tax watchdog challenging tax practices in
the treatment of industrial and social security taxes dating
back to 2008. A company representative declined to comment
beyond the filing.
Natura, Brazil's No. 1 maker of cosmetics, is unlikely to
provision for the potential tax payment and may only take
charges related to lawyers' fees, analysts said.
"Despite the large value of the payment being demanded, we
do not see a reason for the market to be alarmed, at this point
in time," Deutsche Bank Securities analyst Renata Coutinho said
of Natura. "We recall that in 2005 the company faced a similar
challenge and the decision was favorable to Natura, as the
company was in compliance with the law."