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Brazil government hits Natura with tax fine

By Simon Pitman , 08-Jan-2013

The Brazil-based cosmetics company has been given a hefty fine after the government accused it of tax avoidance, a move that has sent share prices tumbling.

The Brasilia-based watchdog, Receita Federal, informed Natura that it would have a combined total fine of BRL627m ($235m), according to a Reuters news source.

The fine is said to stem from due tax payments dating back to 2008, which includes fines and interest on the payments.

Brazil government cracks down on tax

The move comes as the Brazil government attempts to close various tax loop holes and increase tax revenues as the country’s rapid economic growth of recent years begins to wane amidst the backdrop of a global economic slowdown.

As a result, some of the largest companies in the country have come under increasing scrutiny over their tax returns, with Natura becoming the sixth high profile businesses to feel the brunt of these measures since they were introduced at the end of last year.

In the latest tax crack down, Brazil mining company MMX was also slapped with a fine of $3.8bn relating to charges for unpaid taxes dating back to 2007.

MMX executives say they are prepared to fight the tax demands, describing them as having no legal basis, and Natura has also said that it intends to appeal against its fine.

Fighting the fines

A spokesman for Natura told Reuters that the company believed it had acted within the rules and regulations relating to that taxation period, deeming that the risk of loss related to the fine to be ‘remote’.

MMX owner Eike Batista has said that his company’s protest against the tax bill is likely to prove that it is unjustified and that ultimately it will be rejected.

Share prices in the company dipped from a high of BRS59.8 on January 6th, to close trading at at BRL55.9 yesterday, a drop of over 3 percent, and the biggest decline in the stock in four months.

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