The Argentine government wants to create a tax on the “unexpected profits” that companies obtain thanks to the increase in international prices due to the war in Ukraine, an initiative rejected by the main businessmen of the country.
“This war subjects us to two realities: that millions of human beings are at risk while few gain enormously from the effects of this war. This is the immorality that we cannot allow. We are here to balance what has been unbalanced,” Argentine President Alberto Fernández said on Monday night, accompanied by Economy Minister Martín Guzmán, at the Casa Rosada, the seat of government.
The bill seeks to implement a 15% tax on the extraordinary profits of companies. This new rate is added to the current income tax for the year 2022. The affected companies will be those that have a net profit of more than one billion Argentine pesos (about 7.7 million euros), something that, according to the minister of Economy, Affects only 1% of the country’s companies.
The profits of these companies will be taxed if they meet one of two conditions: an accounting profit margin in 2022 greater than 10% or an increase in the profit margin in 2022 compared to 2021 of at least 20%. “The destination of the funds collected will be a fund to be distributed proportionally among the provinces for the implementation of public policies, aimed at greater social equity,” argued Minister Martín Guzmán.
According to the government’s logic, the rise in international prices, due to the Russian invasion of Ukraine, generates an “unexpected profit” for companies that export raw materials without having increased investments to produce more.
“The only way to sustain growth that means progress is if that growth is shared by all,” said Guzmán. “We are bringing equality and building social justice,” concluded President Alberto Fernández, citing similar measures adopted in the United Kingdom and Italy as an example.
Argentina is one of the largest exporters of agricultural products, including the most affected products in Russia and Ukraine, such as corn, sunflowers and wheat. However, in addition to the income tax, producers already pay an additional tax on agricultural exports of up to 35%.
“The creation of new taxes like this announced ‘windfall benefit’ goes against the stimulus for investment and employment. In Argentina, 165 taxes are in force and the tax burden on the formal sector is very high, well above the average of the countries in the region”, criticized the Argentine Business Association (AEA) in a note.
The Argentine Industrial Union (UIA) also issued a statement to express “concern about the effects of an additional tax on the productive sector.”
Since taking office, President Alberto Fernández has raised or created 20 taxes while countries in the region have lowered the tax burden to offset losses from the pandemic and encourage production. The Sarandí consultancy calculates that the new Argentine tax raises the equivalent of 0.41% of the Gross Domestic Product (GDP) and helps the Government reduce the current primary fiscal deficit from 3% to 2.5% of GDP, according to the established goal in the financial agreement with the IMF.
The new tax must go through Parliament, where the government still does not have all the necessary votes. “We ask for and deeply appreciate the follow-up of the Congress in these difficult circumstances for the entire world, to avoid injustices and for Argentina to advance along a path of progress,” exhorted the Minister of Economy, Martín Guzmán.
Source: Observadora
