Swatch Group denied on Friday that it had broken any laws after two former employees claimed that the world's biggest watchmaker had evaded taxes and customs duties with complex pricing methods.
Swatch rejected the reports, which stemmed from complaints filed in the United States by the former financial controllers, that its pricing policy infringed tax laws. It said the matter was merely an employment dispute with the pair, one of whom was looking for more severance pay.
Investors, made jittery by recent accounting mishaps at Swiss staffing firm Adecco, put bearer shares under sharp pressure. The stock was down 4.4 percent to 140.25 francs, while registered shares fell 4 percent.
The bearer stock had opened more than 11 percent lower on the media reports, which came as images of Swatch's logo were to be beamed around the world during the opening ceremony of the Athens Olympics where the firm is the official timekeeper.
Analysts said the sell-off appeared overdone since, even if the allegations proved founded, Swatch faced at worst a charge for tax arrears and a slightly higher tax rate in the future. "If there is a fine and back taxes, the financial impact would appear to be manageable," LODH analysts said in a note.
Swatch, which owns 17 watch brands including Omega and Tissot, has net cash of over one billion Swiss francs and generates net profits of around 500 million, giving it an ample cushion against any potential one-off costs, analysts said.
The Wall Street Journal Europe had said in its Friday edition that the firm faced a complaint by the two former employees who, according to the newspaper, allege the group evaded up to $180 million in taxes and customs duties by manipulating inter-company prices.
Swatch justified its pricing practice, saying that it did so not to avoid taxes illegally but to harmonise international prices and prevent a parallel market.
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