Argentina wants to hike taxes on farm exports and foreign assets

Argentina‘s government wants to raise taxes on agricultural exports and tax foreign assets held abroad, the country’s economy minister said on Tuesday.

The government wants to raise export taxes on wheat and corn to 15 percent from 12 percent, Economy Minister Martin Guzman said at a news conference.

The relevant bill, dubbed by the government as the Social Solidarity and Production Reactivation project, would also raise the tariff cap on soya bean exports to 33 percent from 30 percent.

President Alberto Fernandez was elected in October with a mandate to end the painful fiscal cuts implemented by his predecessor, former President Mauricio Macri. Fernandez’s voters expect more state spending to help families struggling with low growth, rising poverty and rampant inflation.

“They are taking economic measures based on who elected them, taxing farmers and high-income earners to increase social benefits,” said Gabriel Zelpo, director of the local economic consultancy Seido.

The proposed tax increases come as the government gets set to restructure about $100bn in debt obligations. The government says the revamp of loans and bonds needs to be done by the end of March to keep the financial system functioning.

The government’s proposal was sent to congress on Tuesday and seeks funds to bolster social spending as the new administration grapples with annual inflation that is close to 55 percent and an economy that is expected to contract for a third straight year in 2020.

In addition to the modification of taxes to agricultural assets, the bill seeks to tax financial assets abroad. The purchase of foreign currencies would be taxed 30 percent, Guzman said.

The present formula to increase Argentina’s pension payments and public service tariffs would also be suspended for 180 days until the government creates a new one, he said.

“All these measures are intended to be part of a comprehensive programme [and] they are all interconnected,” Guzman said. “We are being very careful in solving all the imbalances.”