Argentine Farmers Protest Against Local Tax Hikes

by Mike Godfrey, Tax-News.com, Washington

25 September 2009

Tax increases introduced in Buenos Aires province to help combat budget shortfalls have met with stiff opposition from farmers fearing 100% land tax hikes will hit hard amid severe drought conditions. Local economists, meanwhile, believe that the additional revenue generated will be insufficient to cover the province's deficit.

The "tax reform 2010" measures announced by provincial governor Daniel Scioli comprise increases of up to 20% in urban land taxes and an average of 30% on rural land taxes; new port levies - loading/discharging charges of ARS 6/18 per tonne; and a 5% tax on cars valued more than ARS40,000. Rises in inheritance taxes are expected to bring in ARS53m (USD14m). The increases are designed to generate ARS1.8bn over the coming year, but by year-end the effect could be as low as ARS200m to meet an estimated financing requirement of between ARS2.5 and ARS3bn.

Even before the laws were passed, farmers had begun to demonstrate in front of the senate building amid claims that land tax rises could be as high as 100% in some instances, and drought conditions had made the increases unaffordable. There are also protests over the new port levies, which coming on top of the hefty export taxes that Argentine farmers already pay. Buenos Aires is the largest wheat producing province of Argentina.

Scioli has threatened that, if the tax reforms are made unworkable, he may be forced to introduce crisis measures similar to those in 2001, when the lack of tax revenue forced the province to issue so-called "patacones" bonds in place of the traditional money supply. Opposition parties claim that the province could have difficulty meeting its payroll by the end of next month. The central government is funding the province's deficit at present.

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