Shortly after being elected, President Macri in Argentina announced an elimination of export taxes on corn and wheat and a 5% reduction on soybean export taxes from 35% down to 30%. He also stated that the soybean export tax would decline by 5% per year until it too was eliminated, but now it seems like the government is trying to walk-back that commitment for future reductions in the soybean export tax.
Late last week, the Clarin newspaper reported that the Minister of Agriculture and the Argentine government were mulling over alternatives to the reduction of the sopybean export tax from 30% to 25% due to the potential impact it would have on government revenues. The Ministry indicated they are looking at alternatives such as delaying the reduction or installing it in a step-wise fashion.
To bolster their argument, the government officials cited the recent run-up in soybean prices stating that soybean farmers are benefiting from the price hikes and that they are better off economically than they were back in December when the tax reductions were announced. They also indicated that all of Argentina is struggling to adjust to the more market-oriented economy and they suggested that the farming sector needed to do their part as well. It was clear that officials felt that farmers were doing better than the average citizen and that the farmers should not complain if there was a delay in reducing the soybean export tax.
Officials have indicated that the tax reduction is still under consideration and that it might be delayed for a period of months or maybe put in place in installments. It is anticipated that President Macri may announce his decision on July 30th to correspond with the opening of a large farm show in Argentina.
Farm groups have objected to the changing policy stating that producers need to know the outcome of the tax situation before they go to the fields in two months to start plant their 2016/17 crops. This is especially true for producers in northern Argentina where the cost of growing soybeans and transportation costs are higher than in central Argentina. Farmers in northern Argentina have reduced their soybean acreage in recent years citing the high export taxes and lack of profitability.
Exporters have also indicated that a clear tax policy is needed before any export business can proceed. Until then, prices cannot be determined and contracts cannot be settled if the outcome of the tax reduction is still in doubt.