Tax Cuts Will Lift Argentine Industries

by Mike Godfrey, Tax-news.com, Washington

14 May 2001

The Argentine economy minister, Domingo Cavallo, last week introduced tax cuts for the country's struggling industries, fulfilling a pledge he made a month ago to improve their competitiveness on a national and international scale.

According to the Reuters news agency, the industries that are set to benefit from the tax concessions are in the clothing, textile and footwear sectors. They will now be exempt from several regional as well as national taxes including an asset-based tax on presumed minimum earnings and the tax on corporate interest. In addition staff benefits can be offset against sales tax so that social security contributions by employers will be allowed to be written off as VAT credits. 'We are starting with these sectors because they are the ones that have suffered most from unfair competition, contraband and (fraudulent) underbilling,' Cavallo explained.

The industries welcomed the measures, which are to be reviewed in 2003, as they have fallen under the shadow of major competitors such as Brazil and some Asian countries in recent years. Companies set to benefit from the tax reductions have said they will be able to reduce their costs by between 2 and 7 per cent. But they warned it would take more than that to ease all their problems. 'In no way does this mean the sectors' problems are over [but] it is an important contribution [and] a change of attitude,' said Alejandro Sampayo, head of the Argentine Textile Industry Federation.

And Carlos Bueno, president of Argentina's Footwear Industry Chamber, said: 'It reverses the trend of the last 10 years of doing nothing and forgetting about industry.'

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