The Government ordered a change in the way of calculating withholdings on vehicle exports, with a charge that became a percentage instead of a fixed sum, as it had been in force since mid-2018. As part of Decree 1060 that defines the withholdings of a series of industrial goods, the Executive Power ordered that as of 2021 automakers pay a 4.5% surcharge for the FOB value of each vehicle they export.
Until now, that tax was 3.36 pesos for every dollar exported, a figure that was liquefying as the peso devalues against the official dollar. With this new way of calculating the tax, the Treasury ensures that the tax remains at safeguard against future devaluations.
The new norm, published when the automotive companies were already on vacation, caused surprise within the companies, which just two days before had had a meeting with the Minister of Production, Matías Kulfas, who had weighed the dialogue table of the sector and polished a bill that proposes to declare a “strategic sector” to the automotive industry. One of the purposes of this project, precisely, is to provide fiscal stability to future investments to be made by the automotive terminals and auto parts companies.
In this context, the new decree took executives in the sector by surprise. “The 3.36 pesos for each exported dollar are liquefying over time and as the peso loses value they represent less value in exports,” they said in one of the companies that increased their exports the most in 2020 compared to previous years. “Now, having a fixed percentage, those same withholdings will maintain a constant value over time.”
Withholdings on vehicle exports is a tax whose elimination has been demanded by companies in the sector for many years, with the argument that it increases the “Argentine cost” of exports and drives away investments: the worst competition that a local automotive company has It is not against another brand, but against the same terminal of its own brand in another country, which disputes the establishment of new investments.
During the Macri government, the withholdings were eliminated in the first stage, but when the price of the dollar soared at the end of April 2018 (it went from 20 to 40 pesos in a few weeks) one of the responses of that government was to reinstate withholdings. The difference was the way to collect them, with a fixed charge of pesos per dollar exported.
The Alberto Fernández government maintained the same scheme in December last year, including the effective date of the tax, which was one year. But in mid-2020 the Ministry of Productive Development included a modification that was praised by the companies: it eliminated to zero the “incremental” withholdings to markets outside Mercosur, which was interpreted as a signal to break the “Brazil dependence” that characterizes Argentine vehicle exports. A few months later, in addition, the Foreign Ministry agreed on a “regional content” scheme with Chile that facilitates the export of Argentine vehicles to that destination.
In parallel, from the Ministry of Productive Development they advanced in a “dialogue table” with the automotive companies grouped in ADEFA, the auto parts companies (AFAC) and the metallurgical companies (ADIMRA) to draft a bill to declare “strategic sector” to the automotive industry and its value chain. The main promoter of this agreement was the Mechanics Union (SMATA), where the workers of all the automotive companies are based, with the exception of Peugeot Citroen, whose workers are affiliated with the Union Obrera Metalúrgica (UOM), the other union that also participates of the table.
The project was in the legal departments of the automakers until late Wednesday. The companies had promised to have everything ready next week so that the Executive Power can send the project to the extraordinary sessions of Congress.
“Everything has been put on the table and I believe that this becomes a model to follow for Argentina: Governments, unions and companies in the productive sector talking harmoniously in order to reach consensus. We have to do this in each sector, “Kulfas said on Tuesday. Within the companies, he assures, the new ways of collecting withholdings, in a fixed manner and without the possibility of them continuing to liquefy over time, were not mentioned.