P&G pays no Israeli tax on NIS 100m profits

Procter & Gamble's annual turnover in Israel is NIS 1.1 billion, but sales are recorded as income by P&G's Swiss unit for tax purposes.

Sources inform ''Globes'' that the annual turnover of Procter & Gamble (NYSE: PG) in Israel is NIS 1.1 billion, and its profit is at least NIS 100 million, but it pays no taxes. Even though P&G has an Israeli subsidiary with a general manager, Elena Kudryashova, the sales are recorded as income by P&G's Swiss unit, based in Geneva, for tax purposes. As a result, P&G Israel has no income or profits.

P&G posted a net profit of $11.3 billion on $83.7 billion revenue in 2012. Given Israel's companies tax rate of 26.5%, the treasury losses at least NIS 26.5 million in revenues on P&G Israel's profit of NIS 100 million.

P&G is one of Israel's largest consumer products company. The Israeli branch was established in 2001, and has 100 employees. Israeli sales have tripled since the branch was established. P&G markets its products to Israeli retailers through Diplomat Group Ltd. In contrast to other multinational consumer products companies operating in Israel, which sell directly to the local market, Diplomat buys P&G's products from its Geneva branch. The result is that P&G Israel has no income or profits, and therefore pays no taxes. Diplomat Group only pays taxes on its own profits.

P&G said in response, "Procter & Gamble does not produce or distribute products in Israel. Procter & Gamble has a services company in Israel, which pays to the Israeli government all the taxes it is required to pay by law for the services provided in Israel. Procter & Gamble sells its products to independent distributors, which import and distribute its products in Israel, allowing consumers to enjoy its high-quality products. Procter & Gamble pays all the taxes levied on it by law in all countries worldwide."

Published by Globes [online], Israel business news - www.globes-online.com - on October 16, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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