Argentina Farm Tax

[Sapphire Capital]

Argentine MPs increase farm taxes
July 5, 2008

Argentina's lower house of parliament has approved a controversial package of taxes on agricultural exports.

Farmers are strongly opposed to the measures and have staged widespread protests over the past four months, resulting in riots and food shortages.

They had threatened to renew blockades if the measures were approved.

President Cristina Fernandez de Kirchner says higher taxes on farm exports are needed to finance social programmes and redistribute wealth.

The farmers say such high taxes are crippling.

The BBC's Daniel Schweimler, in Buenos Aires, says this a dispute about too much, rather than too little.

Argentina is one of the world's leading producers of soya, grains and beef - all of which fetch high prices on international markets.

The senate is due to debate the measure in coming days

[Sapphire Capital]

July 7 (Bloomberg) -- Argentine opposition senators will seek to modify an agriculture tax bill approved by the lower house, delaying passage of a law President Cristina Fernandez de Kirchner is counting on to end protests by farmers.

Opposition senators plan to remove a clause from the bill that imposes an Oct. 31 line for small-scale farmers to file for refunds on export taxes. The removal of the time limit would give farmers ``greater clarity'' as to their financial situation, Ernesto Sanz, a senator for the Radical Civic Union, said in an interview with C5N television channel.

``The possibility that the senate introduces any changes would be extremely damaging for the government, since the bill would then have to go back to the lower house,'' Daniel Kerner, a Latin America analyst at the Eurasia Group in New York, wrote in a report today.

The lower house on July 5 passed Fernandez's bill, which increased export taxes on grains and oilseeds, by 128 votes to 122 after a 17-hour debate. The bill seeks to ratify a March 11 decree that sparked protests among farmers across Argentina, the world's second-largest exporter of corn and third-largest of soybeans.

``The government will not want to risk having to carry out these negotiations again, and risk having to have an additional debate and potentially, offering even more concessions,'' said Kerner.

Lower Taxes

Fernandez imposed a sliding-scale system of export levies on grains and oilseeds to increase tax collections and help contain domestic food prices. She asked Congress to approve the increases as a way to silence protests that resulted in food shortages. To ensure passage of the bill, the lower house modified it by boosting the level of refunds for small and medium-sized farmers.

``We disagree with the refunds,'' Juan Carlos Marino, a senator of the Radical Party, said in a telephone interview. ``If you have to give a refund to someone it's because you are taking something you shouldn't in the first place. We'd like to lower taxes for those farmers, instead of giving refunds.''

Farmers will meet senators tomorrow to discuss possible changes of the bill, Marino said. The 72-member house needs a simple majority to approve the bill. If senators make changes, the bill will go back to the lower house for approval, he said.

Senators probably will vote on the bill on July 16, Sanz said.

[Sapphire Capital]

Argentina drops disputed farm tax

Argentine President Cristina Fernandez de Kirchner has cancelled controversial tax increases on agricultural exports, which sparked months of protests.

Export levies will return to the fixed rates that existed before March, said cabinet chief Alberto Fernandez.

The Senate had narrowly rejected the government's proposals in a vote following more than 16 hours of debate.

Farmers said the taxes would be crippling, but the government said they were needed to fight poverty.

The tax on farm exports was intended to fund the building of schools, roads and hospitals but strikes by farmers led to food shortages in some parts of the country and a political crisis.

The BBC's Daniel Schweimler in Buenos Aires says that the president had little choice but to scrap the tax increases following the dramatic Senate vote on Thursday.

Senators were tied 36 to 36 after more than 16 hours of debate, until the Vice-President, Julio Cobos, cast the deciding vote to reject his government's proposals.

Our correspondent says it is the first sign of any weakness or backwards step shown by the government, which is often criticised for its intransigence.

Argentina's farmers are delighted by the move, our correspondent adds.

'A hungry world'

Argentina is a major producer of soya, grains and beef, which fetch high prices on international markets.

The dispute between the government and farmers began in March, when President Fernandez's government raised taxes on soya exports from 35% to 45%, and imposed new taxes on other farm exports.

The government argued that they needed to raise taxes on agricultural exports to help build a new Argentina.

It said farmers could afford to pay more, as they were benefiting from high prices.

The authorities also accused farmers and their supporters of undermining democracy by refusing to respect the wishes of the elected government.

However, farmers' leaders said that any profits needed to be reinvested so that Argentina, one of the world's leading agricultural producers, could help to feed a hungry world.

July 18, 2008