Argentina President Alberto Fernandez unveiled legislation on Monday to slap a 15 percent tax on companies’ extraordinary profits, a move seen as appeasing the most radical left-wing members of his divided coalition even at the risk of irritating business.
The bill would apply a levy on the so-called “unexpected profits,” or annual gains above one billion pesos (US$8.3 million) along with other requirements, as exports in the commodities-producing country boom. The government, which justified the measure given the recent price spike in agriculture products including wheat, didn’t provide details on how many companies would pay the tax.
“We’ve come to create more equality, we’ve come to build more social justice, and that’s all that we’re doing,” Fernández said in Buenos Aires.
While the proposal is unlikely to pass through a fragmented Congress, where the government doesn’t control any of the two chambers, Fernández’s announcement comes in the wake of another internal setback for his ruling coalition. On June 4, he was forced to fire Productive Development Minister Matías Kulfas, one of his top allies, after the official criticised a speech Vice-President Cristina Fernández de Kirchner gave the day before.
Taxing Argentina’s wealthy exporters, with increasing revenue in dollars, is a popular idea among far-left leaders of the coalition led by Fernández de Kirchner. Soy exporters already pay a 33 percent tax on shipments abroad, a key source of government’s tax revenue. The proposed measure comes after Fernández de Kirchner repeatedly criticised the lack of economic policy direction in the Fernández administration.
The tax would help offset some of the government’s US$1.8 billion of cash handouts that were distributed recently as annual inflation hit a 30-year high in April. Other countries, such as the United Kingdom and Italy, have implemented similar taxes.
Opposition lawmakers repeatedly said they wouldn’t support a new tax in the crisis-prone economy.
by Patrick Gillespie, Bloomberg