EXCLUSIVE-'There will be people in jail': Mexico plans arrests soon in tax crackdown

By Daina Beth Solomon and Carlos Gonzalez Galvan

MEXICO CITY, July 15 (Reuters) - Mexico could issue arrest warrants for suspected tax dodgers by September, a top prosecutor said, as the government ramps up an aggressive campaign to squeeze more revenue out of businesses and end years of what it calls weak tax collection.

A crackdown aimed at boosting state coffers in the country with the lowest tax take in the Organisation for Economic Co-operation and Development has already pushed retailer Walmart Inc's Mexico unit WALMEX.MX and Coca-Cola bottler Femsa FMSAUBD.MX to fork over hundreds of millions of dollars.

Various criminal complaints over tax violations are pending, Fiscal Prosecutor Carlos Romero said in an interview, without providing details on the number or the targets.

"We were going to have the first arrest orders between April and May, but a pandemic hit us. Right now, I expect it will be between September and October," Romero said. "Between 2020 and 2021, there will be people in jail."

The tough tactics are possible due to a reform implemented this year that classifies tax fraud over 7.8 million pesos ($343,419) as a serious crime. Under it, suspects can be arrested when charged and held in custody during proceedings.

Romero said the timing of arrests would depend on courts and other authorities being able to re-open after Mexico's pandemic lockdown.

The attorney general's office is responsible for filing charges with a judge and carrying out arrests based on complaints filed by the tax prosecutor.

If large corporate taxpayers were to come under scrutiny, arrest warrants could target several types of positions, including the person in charge of tax payments, board members, lawyers and accountants, Romero added.

Mexico's tax chief, Raquel Buenrostro, said last month that officials had opened "four or five" cases of corporate tax fraud this year alone, without disclosing names.

Romero said this year his office closed two "important" criminal cases against companies, without specifying how they were resolved. In a third instance, a company reached a deal with the government when presented with the risk of criminal charges, he said.

He did not identify the cases closed or the company that reached an agreement.

Walmart de Mexico's corporate affairs director has said she did not have knowledge of a criminal complaint, after the company said it paid 8.08 billion pesos ($359.94 million) in an agreement with the tax authority over the sale of a restaurant chain.

Femsa, which pledged to pay 8.8 billion pesos in taxes, was not presented with a criminal charge, a spokeswoman said.

President Andres Manuel Lopez Obrador in June said Japanese automaker Toyota Motor Corp 7203.T was in the process of putting its tax situation in order.

Toyota in Mexico declined to comment on its tax affairs.

"If the president has not made an announcement, it's because there's still no news," Romero said.

($1 = 22.4480 Mexican pesos)

(Reporting by Daina Beth Solomon and Carlos Gonzalez Galvan; Editing by Leslie Adler)

((daina.solomon@thomsonreuters.com; +52 55 5282 7150;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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