TAX NEWS - JUNE 2010

Argentina Tax: Argentina's Tax Collection Surges Amid Growth, Inflation

01 June 2010, BUENOS AIRES (Dow Jones) -- Tax revenue surged in Argentina last month in line with robust economic growth as consumers bought more goods and services and prices rose amid soaring inflation.

The government collected about 44% more revenue in May than it did a year ago, a Treasury official said Tuesday.

Tax collection totaled 39.34 billion pesos ($10 billion), said Ricardo Echegaray, head of the federal tax collection agency, AFIP.

"This is an extraordinary performance," said Echegaray.

Last year May tax collection totaled ARS27.2 billion.

May's tax revenue is the largest of any month in history when measured in dollars, Echegaray said.

Revenue rose mainly because of increases in higher income, value-added and foreign trade taxes. Rising contributions to social security also pushed taxes higher.

Value-added taxes rose 33% to ARS8.9 billion while income taxes catapulted 76% to ARS11.4 billion.

A tax on financial transactions rose about 30% to ARS2.2 billion while duties on exports like soybeans brought in ARS4.2 billion, up 47% on the year.

Import taxes rose almost 44% to about ARS793 million.

Contributions to social security rose 33% to ARS7.6 billion.

The numbers may appear to be more impressive than they might if rapidly rising consumer prices are considered.

Inflation has soared over the past year, cutting into the tax gains in real terms, economists say.

Argentina's 2010 budget estimated the consumer price index would rise about 6% this year, but through the end of April, annual inflation was running at about 10%, according to the government's statistics institute, Indec.

Meanwhile, most private-sector economists question the legitimacy of the official data, saying the government manipulates the data--a charge the government denies.

Private-sector economists estimate that inflation is running at two or three times the official rate.