August 26, 2010

Argentine legislators seek to trim grain export taxes

Argentine opposition lawmakers have agreed on a draft bill that would reduce, and ultimately abolish, heavy taxes on grain exports, a major source of state revenue.

The proposal approved by the lower house's agriculture committee late on Tuesday (Aug 24), would cut the soy export levy to 30% and then reduce it by five percentage points per year, deputy Ricardo Buryaile said in a statement.

The bill, which must be presented to the lower house for debate, would also reduce the tax on corn shipments to 10% from 20%, cutting the levy by five percentage points per year thereafter until it is eliminated.

Chances that the proposal will be approved by Congress without changes are slim, particularly in the Senate, according to political analysts.

Fernandez has been locked in conflict with farmers in the leading grains exporter since 2008, when a tax hike on soy exports triggered months of strikes and roadblocks.

She was forced to reverse the hike, but farmers said the current export levy of 35% on soy is still too high. Sales abroad of corn, wheat and sunseeds are also heavily taxed and the income accounts for about 10% of revenue.

The draft bill drawn up by Buryaile, a former farm leader, has exposed rifts between the four leading farming associations that led the anti-government protests two years ago.

Members of the Argentine Agrarian Federation (FAA), which represents smaller-scale growers, said Buryaile's proposal does not do enough to reflect vast income differences within the farming sector.

"This proposal maintains the current situation of wealth inequality, but with lower taxes. So the ones who lose out are always the same - the small- and medium-sized producers," said legislator Ulises Forte, a former FAA leader.