On April 9 2004 the Argentine Ministry of Economy announced several changes to the tax system mainly aimed at promoting investment in Argentina. The more relevant initiatives are as follows: 21% VAT applicable on capital goods and investments related to infrastructure works would be creditable against other taxes or refunded to taxpayers after a three-month period;
an accelerated depreciation system will apply to investments on new projects made in the next three years; and
financial transactions tax applicable on bank account movements would drop from 1.2% to 1% since taxpayers will be entitled to compute 0.2% as a credit against other taxes.
As the government has compromised a limited budget for the abovementioned VAT and income tax incentives the effectiveness of these measures remains doubtful.
The proposed measures are to be drafted and sent to Congress for approval. On the other hand, Decree 491/04 which provides for an increase in employer contributions for high-earning employees has been published in the Official Gazette on April 22 2004. According to the new rule, the ceiling amount upon which employer-contribution rates are applied will increase gradually so that the limit will be phased out by October 1 2005.
Andres Edelstein (Andres.m.edelstein@ar.pwc.com) and Gustavo Wunder (Gustavo.wunder@ar.pwc.com), Buenos Aires
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