August 22, 2008


Argentina grain exporters face fraud investigation


Argentina's Congress voted late Wednesday (August 20) to form an investigative commission to look into accusations of fraud and tax evasion by grain exporters.


Last month, the government announced plans to collect retroactive taxes from exporters that had declared grain and oilseeds sales before a November increase in grain export taxes. Those unable to show that they had already purchased the grain on the local market before making export-commitment declarations will have to pay the higher tax.


Late last year, amid speculation that the government was poised to raise grain-export taxes, exporters submitted an unprecedented flood of export commitments to the government.


On November 7, the government raised the export tax on soy to 35 percent from 27.5 percent and the tax on soy oil to 32 percent from 24 percent. Wheat export taxes were raised to 28 percent from 20 percent, while the tax on corn rose to 25 percent from 20 percent.


Farmers have long complained that exporters take advantage of the export-permit system to reap sharp profits at their expense. When an exporter declares an export commitment to the government, a permit is granted locking in a reference price and export tax rate.


In a period of rising grain-export values and rising export taxes, as was the case during the end of last year and early this year, exporters were able to bank the wide margin between the tax on their declared export sales and the theoretical tax discounted from the purchase price on the day when they actually bought the grain from farmers.


When exporters purchase grain at the local exchanges, the value is calculated based on a theoretical FOB price on that day minus export taxes.


The congressional vote comes amid a government campaign to crack down on what it claims are speculative maneuvers and tax evasion by the grain exporters.


The government has launched a series of measures to clamp down on the sector - invalidating export permits made before a November tax hike, shutting down processing plants where it suspects irregularities, launching a wave of audits of exporter books by tax authorities and backing the congressional investigation.


With some US$1.77 billion at stake, Argentine exporters have reacted angrily. The grain and vegetable oil export chambers, Ciarra and CEC, said the government had miscalculated the amounts owed and contended the early export declarations weren't done to avoid taxes.


Of the 30 million tonnes of grain declared for export before the November tax hike, 24 million tonnes had not been previously purchased and will be subject to the new, higher tax, according to Oncca, the agricultural trade office.   

Video >

Follow Us