At the beginning of the year, changes to the soybean export withholding system came into effect to try to reverse the decline in foreign sales of the soybean complex. The fiscal cost of the measure is around $20 billion for the first year, of which the provinces will stop receiving some $6 billion through the Federal Solidarity Fund, which distributes 30% of the soybean withholdings. And the impact will double in 2019 because the soybean and soybean oil withholdings will drop by 0.5% per month, from 30% and 27%, respectively, that they had until last month, to reach 18% and 15% at the end of 2019. Meanwhile, the mobile withholdings on biodiesel, which are minimal and barely manage to generate revenue, will be removed.
Soybean Tax Reduction
Fixed withholdings of 8% replace them. The reduction in soybean taxes was to be implemented a year ago, as part of the promises of Mauricio Macri’s presidential campaign, who began his term with a 5% reduction in that tax. Still, it was postponed due to the fiscal impact of the reduction, which the Rosario Stock Exchange estimated at almost $20 billion for the first year. In any case, said report stated that “it is very likely that this figure will be offset by greater collection of other taxes,” due to the greater dynamics of the sector. However, opposition leaders questioned the reduction in soybean taxes, which will have an annual fiscal cost of around $40 billion, starting in 2019; while the new retirement law reduces payments to retirees, pensioners, and beneficiaries of the Universal Child Allowance, to have a fiscal saving of close to $56 billion.
Export Tax Adjustments
The reduction in export tax revenue will impact the provinces, although official sources say that they will be partially offset by the modification of the Income Tax, which the Nation now shares with the provinces at 100%. As established by decrees 1343/16 and 1025/17, the official objective is to achieve a convergence system between the percentages of withholdings for all by-products of the soybean complex. For this reason, the rates for soybeans and soybean oil are being lowered; and the mobile rates for biodiesel, which are at just over 0%, are being removed and replaced by fixed rates of 8%.
Soybean Export Impact
“A harmonization between the export duties on biodiesel and its main raw material, soybean oil, is necessary to achieve a convergence between them,” was stated in the decree that established the rates for withholdings on soybean by-products. With biodiesel, the Government hopes to collect around $2 billion new, with this industrial byproduct of soybeans. On the other hand, the reduction in the withholdings on soybeans and soybean oil will have a fiscal impact of around $40 billion starting in 2019, since the Government will stop collecting that money from soybeans. The soybean complex went through a very complicated 2017, with exports down in all its by-products: beans, flour, oil, and biodiesel.
Soybean Export Decline
Beans had a year-on-year decrease of 17% in the first 10 months of the year, reaching US$2.635 billion exported between January and October. A similar year-on-year drop occurred in soybean flour, which fell 14.5%, falling to US$7.125 billion this year. The drop was smaller with soybean oil, which fell only 1.15% in export values, reaching US$3.189 billion in the first ten months of the year. Biodiesel had a 4.1% drop in volume due to the closure of the US market, which was not compensated by the reopening of the European market.
