Mexico Tycoon’s Tax Case in Top Court, With $2 Billion at Stake
Mexico Tycoon’s Tax Case in Top Court, With $2 Billion at Stake
(Bloomberg) -- Billionaire Ricardo Salinas Pliego’s long-running tax dispute with the Mexican government is headed for review by one of the country’s Supreme Court justices in a case that could affect about $2 billion in claims.
Justice Jose Franco is taking up the dispute between Salinas’s flagship Grupo Elektra SAB and the government over 2.6 billion pesos ($130 million) in income tax payments from 2006, according to documents on the court’s website.
While the tax case is only one of eight against Elektra, the Supreme Court’s decision could impact all of the other claims, which are worth almost $2 billion combined, according to Mexico’s tax chief Raquel Buenrostro. Those cases are based on the same “aggressive” interpretation of rules for the consolidation of taxes in business groups, Buenrostro said in a July 17 interview.
“The eight cases use the same tax evasion scheme,” she said. “If this one is confirmed, the others should fall out the same.”
Salinas’s companies will continue to defend themselves in the case, spokesman Luciano Pascoe said in a response to questions from Bloomberg News. Pascoe, who is also the head of Salinas’s cable network ADN 40, said the company was convinced it was legally and ethically in the right.
“Like any company in this country, we have every right to disagree with the tax authorities and to defend ourselves against what we consider erroneous and excessive charges,” Pascoe said.
Elektra, a finance and retail company, is the foundation of Salinas’s business empire, which also controls the country’s No. 2 television network, TV Azteca, as well as cable TV, energy and security services. With a fortune of around $15.4 billion, he is the country’s third-richest man, according to the Bloomberg Billionaires Index.
President Andres Manuel Lopez Obrador has been cracking down on tax evasion, allowing him to shore up government income even during the economic collapse of the coronavirus pandemic. Salinas has been a member of the president’s group of business advisers, but that hasn’t stopped the government from going after another member, Miguel Aleman Magnani, who was charged with tax fraud earlier this month.
Buenrostro’s comments on the Elektra case were part of a wide-ranging interview on her plans to crack down on tax evasion, including a greater focus on foreign companies such as automakers.
The other seven cases cover claims from 2006 through 2013, according to Elektra’s latest annual filing. Salinas’s companies are facing further audits from more recent years, including probes into how its soccer and TV stars were paid. She said authorities had been auditing for practices that were used widely across the soccer and TV industries, and that those audits would be completed soon.
Buenrostro said Mexican companies were paying soccer stars and TV actors with an array of royalty payments, and using other methods in an arrangement to avoid taxes related to salaries.
Mexican tax authorities, known as the SAT, have been fighting Elektra in court for more than a decade. In the case now under review, the SAT won its first ruling in a Mexico City court in 2011. It could take weeks or months before Franco has a decision to put to a vote before other justices
Franco was assigned the case on July 7, according to a posting last week. The filing includes more than 6,000 pages from previous lower court rulings that sided with the SAT but were appealed by Elektra. Two other justices, Ana Rios and Norma Piña, were required to recuse themselves from taking the case.
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