Companies Agree To Pre-Pay Tax To Argentine Government

by Amanda Banks, Tax-News.com, London

23 July 2001

According to news reports from South Amercia, foreign companies from Spain such as telecoms firms Telefónica and Telecom have agreed to pay tax bills totalling US$150 million between them, in order to assist the Argentine government in meeting its fiscal targets for this financial year. The oil company Repsol-YPF has also agreed to pre-pay US$150 million.

Taxes will also be pre-paid by many of Spain's and Argentina's leading banks including Banco Santander Central Hispano and Banco Bilbao Vizcaya Argentaria.

'We all need to be doing our part, and we think Argentina can resolve its difficult economic situation,' said Andrés Alcaraz, a spokesman for Telefónica in Argentina.

It appears that the government has exhausted its lines of credit and intends to use the tax advances to fund the country's provinces. Disposing of provincial and federal budget deficits will help it to meet debt payments. It insists that it will not be paying interest and there will be no incentives on offer.

However, Javier Montoya, who co-manages about $2.6 billion in European assets for Barclays Fondos SGICC, told the local press: 'Typically the government agrees to some kind of favor for the companies that do something like this.'

Montoya added that the companies are simply acting to protect their investments, 'once you've made such a big investment, you've got to keep playing,' he said.

Economy Minister Domingo Cavallo welcomed the initiative; he hopes to raise around US$1 billion in total and views it as a major advancement in Argentina's economic recovery.

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