Skip to main content

Will The Gov’t Increase Taxes on Overseas Flights and Impose New Ones on Credit Card Purchases Abroad? Dujovne Says No; Dietrich and Peña, Maybe

By | [email protected] | July 3, 2018 11:07pm

dujovneNicolás Dujovne / Source: Urgente24
Share

Update: following intense media scrutiny about the contradictions, Cabinet Chief Marcos Peña took to Twitter to support Dujovne’s initial statements and clarified the government ifs not planning on increasing taxes on overseas flights o credit card purchases made abroad.

“We don’t think that the solution to the problems we have is raising taxes.”

 

“There is already a seven percent tax on the sale of flights overseas. The only thing I said is that there are sectors who believe this tax should be higher. And that is what’s on the table, along with many other proposals that will be discussed in the context of the debate over next year’s budget bill,” reads Peña’s tweet.


The government is scrambling to find ways to reduce the both the fiscal and current account deficits, as well as retain dollars within the country, but it doesn’t seem to be finding consensus regarding the best means to do so. The most recent episode of the kind involves the possibility of increasing the taxes on overseas flights from seven to 15 percent – Macri had already increased them from five to seven percent in January 2017 – and implementing a 15 percent tax on credit card purchases made outside Argentine borders.

Since the former measure can only be implemented by law, the government could include it in the 2019 budget bill. The latter, however, could be put into effect in a quicker manner and therefore, if given the green light, could arrive soon.

While Treasury and Finance Minister Nicolás Dujovne is emphatically opposed to the measures, his counterparts in the Transport Ministry Guillermo Dietrich and Cabinet Chief Marcos Peña have publicly stated that this is definitely a possibility that is being considered.

In fact, this contradiction happened in the span of just a couple hours. In a conference call with foreign investors yesterday, Dujovne denied the government would move forward with the taxes: “We are not even close to setting up capital controls nor we are considering implementing taxes on overseas tourism,” he said.

In a press conference set to announce the removal of imposed minimum prices to flights, Transport Minister Dietrich said “all possibilities will be evaluated.” “Nothing has zero chance of happening,” as “it’s all part of the conversations we are having with the Treasury Ministry to agree on next year’s budget,” he added.

On his end, Peña said in a radio interview this morning that imposing the taxes is “one of the things that will be analyzed, but will be done in a wider context, which aims at reaching fiscal balance.” According to press, these initiatives have the support of Interior Minister Rogelio Frigerio and Central Bank (BCRA) Governor Luis Caputo.

However, Dujovne reportedly opposes the measure to such an extent that he threatened to resign if the government moves ahead with it, as he considers it would send an extremely negative signal to international markets.

Argentina has had a current account deficit in the travel sector since 2011, year in which the currency controls imposed by the Kirchner administration went into effect. In 2017, the deficit reached US $10.6 billion and, according to Infobae, it could amount to US $15 billion this year.