Brazil police arrest Cisco executives on tax fraud

Brazil's Federal Police arrested Tuesday 40 people who were allegedly involved in a foreign trade scheme to favor U.S. multinational Cisco Systems.

The director-president of Cisco's subsidiary in Brazil and entrepreneurs, tax auditors and directors were arrested in Sao Paulo, Rio de Janeiro and Bahia in a joint operation conducted by the U.S. Internal Revenues Service (IRS) and the Brazil Federal Prosecution Office.

The Brazilian police and the U.S agency also requested the arrests of five Brazilians in the United States and investigations into Cisco Systems' headquarters and some of its employees.

Gerson Schaan, IRS coordinator-general of Research and Investigation, said the suspects had allegedly lowered the prices of imported hardware and increased prices of software imports.

As the software tariff is lower than that for hardware, the total price of the imported products can remain the same, while the amount of tax that is paid is significantly lower.

Schaan said he believed that the scheme allowed a 50 percent reduction in the products' final price in the local market, which made them much more competitive than the products that paid taxes in accordance with the law.

The scheme has evaded taxes up to 1.5 billion reais (820 million U.S. dollars) over the past five years, according to the police.

Brazilian Minister of Justice Luiz Paulo Barreto said that tax evasion has forced the country's computer industry to face "severe competition," and that the operation dismantled the scheme that "caused immense losses to the Brazilian industry and to jobs in the sector."

The operation has also seized 10 million dollars in imports and18 vehicles, as well as 290,000 dollars and 250,000 reais (137,000 dollars) in cash.

Cisco is a world leader in Internet, corporate networking and telecommunications equipment markets.

It is the first time an investigation carried out in Brazil has targeted the involvement of a big multinational company's headquarters, Schaan said.

Source: english.people.com.cn