Tax Talks Delay Fiscal Reform Package In Argentina

by Mike Godfrey, Tax-News.com, Washington

25 October 2001

The Argentine government is on the verge of announcing cabinet changes and initiatives to spur the economy out of its fourth year in recession but talks to finalise the details have been delayed due to conflicts over the plan to cut the 23 provinces' share of revenue to bring it in line with recently declining tax collections.

Reuters news agency has reported that the center-left government, which was defeated in the October 14 mid-term congressional elections by the opposition Peronists who are in control of most of the provinces, is hoping to secure a deal before releasing any information to the public regarding changes to the Cabinet or measures to promote investor and consumer confidence.

'Nothing can be expected until the problem with the governors is resolved,' said an Economy Ministry official.

When the provincial deal is announced it is also expected that Economy Minister Domingo Cavallo will unveil an agreement with local pension funds, which own the majority of Argentina's $132 billion public debt, to accept an exchange of high-interest bonds for lower interest bonds in an attempt to cut down on debt-servicing costs.

In addition Cavallo is aiming to introduce reliefs on the high 21% sales tax applying to credit card purchases in a bid to crack down on tax evasion by discouraging cash transactions.

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