August 31, 2011

Argentine tax agency to appeal ruling on Bunge's case

Argentina's tax agency, Afip, will appeal a ruling that ordered the government to reinstate Bunge Argentina on a grain registry.

The case is part of a simmering conflict between the administration of President Cristina Kirchner and grain exporters over taxes.

Soy and corn products were largely responsible for Argentina's US$11.6 billion trade surplus last year, while taxes on farm exports account for a significant percentage of the federal government's revenue.

Last week, a federal appeals court in Cordoba Province upheld a ruling that ordered the government to reinstate Bunge Argentina because Afip's decision to expel the firm from the registry was arbitrary and violated existing laws and regulations.

Bunge Argentina was taken from the registry because it was accused of triangulating grain trades through other countries to evade hundreds of millions of dollars in taxes.

The action was part of part of a broad crackdown against grain exporters who the government has accused of dodging taxes. Grain companies have denied the charges and vowed to fight the sanctions levied by the government.

While exclusion from the grain registry does not prevent a company from exporting, it does cause the income tax withheld on domestic grain trades to rise to 15% from 2% as well as the withholding of a 10.5% sales tax. The affected firms also face additional red tape to obtain domestic shipping permits.