Argentina May Apply Discriminatory VAT On Imported Electronics

by Mike Godfrey, Tax-News.com, Washington

07 October 2009

This month, the Argentina Upper Chamber of parliament is expected to debate an increase of value-added tax on electronic and other products from 10.5% to 21%. The bill was approved in the lower chamber, but may have to return there after expected amendments are made.

The tax would fall mainly on imported goods, but goods from Argentina's main electronics manufacturing region, the Tierra del Fuego special economic zone in southern Argentina, are specifically exempted. Under World Trade Organization (WTO) rules the tax is thought to be discriminatory.

The list of products subjected to the so-called 'technology tax' includes cellular phones, portable computers, monitors, televisions, GPS devices, digital cameras, video recorders, MP3 players, air conditioners and microwaves. Various readings in parliament in August and September have been held up for technical reasons including lack of quorum and the inclusion of air conditioning units, which, it was thought, gave an unfair advantage to certain manufacturers. Also after some debate, it was decided not to include notebooks and netbooks in this tax increase.

CICOMRA, Argentina's IT and telecommunications trade body, vehemently opposes this bill, which it claims would lead to hikes of up to 34% in the prices of these so-called 'luxury' consumer products and would adversely affect an industry that employs 180,000 Argentines and has invested USD5.5bn in mobile communication infrastructure in the last 3 years.

WTO law allows value-added tax on imported goods but bars discrimination between imported and domestic products under Article III:2 of the 1994 General Agreement on Tariffs and Trade (GATT 1994). If Argentina imposes value-added taxes which are deemed to be discriminatory, such action could be challenged by other WTO members and scrutinized by a WTO dispute resolution panel.

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