April 18, 2009

Argentina gov't takes over grains sales registries

In another move imposing greater state control over the country's agricultural trade, the Argentine government Friday (Apr 17) took over the management of some key registries of grains transactions that had previously been managed by six privately owned exchanges.

According to a resolution published in the Official Bulletin, the registries for sales of various cereals, seeds and legumes - which are used to determine producers' rights to value-added tax refunds - will now be exclusively maintained by the national tax agency, AFIP.

The government is arguing that the decentralised system, in which responsibility for maintaining the registries was handed to the exchanges during the deregulatory push of the 1990s, encourages tax evasion. The preamble to Friday's resolution said it was drawn up with the goal of "deepening fiscal mechanisms" with "more efficient controls."

But farm leaders - who have been locked in a bitter dispute for more than a year - may well see the measure as another unwelcome intervention in their affairs. The farmers have led protests and periodic sales boycotts in a so-far unsuccessful bid to get the government to reduce a 35 percent tax on their biggest and most lucrative export - soy.

The move comes amid deterioration in the government's tax collection capacity. Although its tax intake rose by a stronger-than-expected 23 percent in March from a year earlier, the result was distorted by inflation - which is thought to be above 15 percent, by a surge in social security receipts after private pension funds were nationalised last year, and by a decision last month to withhold VAT refunds.

It also coincides with a recent improvement in world soy prices, which has eased some of the pressure on farmers and restored attention on their exports as a continued source of government revenue when other taxes are falling in line with a rapidly declining economy.