Business associations rejected the new economic measures set in place last Monday, given that they have a negative view of the new tax to be applied to goods and services. As of Wednesday, there is “total uncertainty” regarding what companies will be exempted from paying the tax, which ranges from 7.5% for goods, to 25% for services. Ámbito was able to learn that these associations will ask Economy Minister Sergio Massa “reevaluate” so that more sectors are exempted. 

The Argentine Business Association (AEA, for its Spanish initials), which brings together the owners of the country’s largest companies, stated that the new measures increase tax burden, and that it will have an impact on the “competitiveness” of exports. They even questioned the legitimacy of the tax: “This decision, which implies the discretional creation of new taxes while omitting the participation of Congress, causes great concern in the business world”, they said in a press release.

The Argentine Industrial Union (UIA) also issued a harsh statement, saying the measures will have a “negative” impact, “further limiting access to resources the industry needs.” They also said that the tax reflected an “anti-export bias” and could lead to “price distortions” by randomly impacting chain values. Because of this, they expect the measures to be “transitory, the result of a shortage in foreign currency.”

The press release highlights the areas that business associations will try to change. On one hand, the fact that the new tax is applied to imports previously ordered, thus generating “retroactive costs” not covered by foreign exchange, and that could lead to “payment breaks.” They also criticized the fact that not all the companies included in the Fair Prices agreements have been exempted, “which will put even more pressure on costs and prices.”

The Chamber of Commerce (CAC) called the measures a “differential exchange rate,” which generates a “hidden devaluation, with the contractionary consequences this implies.” They conducted an analysis that showed that the new agro dollar and the import tax will not help in bolstering reserves. “Pressure on the exchange rate will continue”, they said, adding that “given that the sector could expect the situation to worsen, it would need to stock up and not be left out of the market in the coming weeks. This would further aggravate the Central Bank’s foreign exchange problem.”

Within the small and medium business sector (SMEs), the General Business Confederation (Cgera, for its Spanish initials) said that the impact of the measures is “dissimilar,” with a “minimum impact” on industries that require few imported goods and a “strong impact” on those who have higher costs in imported goods. Above all, they highlighted the impact on exporting SMEs. “The consequences [of these measures] in some activities needs to be reevaluated,” they said in a press release.

Business associations say there is “total uncertainty” regarding the list of sectors that will be exempted from the tax. It was announced that those sectors would be fuel, healthcare and the basic food basket. In its press release, the UIA said that “there is also the difficulty of exempting all raw materials, inputs and intermediate goods associated with the basic food basket.”

A major food company said that for them “it was not clear if the list would be divided by companies, sectors or products, or if there would be any crossover with Fair Prices.” Marcelo Fernández, from Cgera, raised a similar issue: “Will the ink used for food packaging be included or not?” He added that he is considering asking the Economy Ministry to exempt industrial inputs that are not produced in the country.

The Domestic and Foreign Commerce Secretariat, led by Matías Tombolini, will be in charge of the fine print of the measure. Meanwhile, the UIA said that price lists “with 8% raises in dollars” have already started arriving, while sources from the Medium-Sized Companies Confederation (CAME, for its Spanish initials) stated that there are already lists with increases between 5 and 9%. CAME has invited Massa, “in his role as Minister of Economy and not as a [presidential] candidate,” to their next meeting on August 9, in order to clarify doubts and relay their concerns. 

Sources from Cadiem, a business chamber that imports medical equipment (Cadiem) sent a letter to the Economy Ministry asking for clarifications. “[The Commerce Secretariat] will specify who will be exempted from the basic basket. [The Energy Secretariat] will do the same for fuel, and regarding healthcare, we do not have the details of how it will be, if it applies to equipment, supplies or medical services, details are still pending,” said a business source. In the meantime, experts in foreign trade said they were unable to conduct some operations while they waited for Argentina’s Tax Bureau AFIP to update its systems.

Orgininally published in Ámbito.com