Tax Advisers - Deloitte

Argentina
Taxes, the global picture (2006), by the World Bank and PricewaterhouseCoopers
comparing tax regimes around the world.
How to reform
There seems to be a consensus on the necessity of reducing or repealing these so-called
distorting taxes through a major tax reform. The dilemma the government has to face is
how to implement these changes without jeopardizing the current fiscal surplus, a crucial
aspect to which the authorities have been paying close attention, and which makes a
substantial reform a challenging exercise.
The government has so far been reluctant to consider eliminating these taxes in view of
satisfactory performance. The enactment of special tax regimes to promote investments
shows that the authorities are conscious of the high level of taxation and willing to
encourage investment projects, although the budget devoted to that end is limited. We
refer to the temporary regime for investments in capital assets and infrastructure works
and the software promotion regime (Law 25,924 and 25,922 respectively, both enacted in
2004), and the special regimes for the production and use of Biofuel and Hydrocarbons
(Law 26,093 and 26,154 respectively, both launched in 2006).
Although there are conflicting views on the impact of tax cuts on the flow of foreign direct
investment (FDI) and no simple relationship seems to exist between the overall level of
taxation and long-term economic growth, studies do find evidence of the negative
influence of high levels of taxation. Moreover, there are clear signs that the level of
taxation has significant influence on investment decisions.
In the context of fierce competition among countries to attract investments, the design
and implementation of a tax system that encourages them, together with other sound
measures aimed at improving the investment climate and the business environment,
should be one of the main items of the Argentine Government’s agenda.
According to the World Bank publication mentioned above, tax reductions are possible
when reforms target increasing compliance and the tax base. Three ways to start a good
reform are discussed in the report: simplification of the tax legislation, which also implies
the repeal of exemptions or special treatments; easing filing requirements, for instance by
making electronic filing possible and eliminating excessive paperwork; and consolidating
taxes. These general guidelines may well be taken into consideration in the establishment
of a friendlier tax system in Argentina, together with other specific initiatives such as the
alignment of tax policies among the different taxing jurisdictions (federal, provincial and
municipal levels), and the expansion of the tax treaty network (composed of 18 treaties,
most of them concluded with European and American countries).
In the meantime, to take advantage of the many opportunities that the Argentine
economy offers, careful tax planning is essential, not only to ensure that all the tax
implications and exposures have been duly addressed, but also to determine whether the
project fits the scope of the various tax incentive regimes currently available.
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