Co-ops in Argentina could lose tax exemption

The change has been proposed in the 2019 budget document

Argentine financial co-operatives and mutuals could lose their tax-exempt status under proposals in the government’s 2019 budget document.

The document includes an amendment to tax laws that removes the exemption from paying tax on profits for co-operatives and mutuals active in banking and insurance.

The budget, which has been approved by the Senate and the Chamber of Deputies, sets a tax rate of 6% for these co-ops and mutuals. But after protests from the co-operative sector, the Senate approved an amendment which lowers the tax rate to 3%. This law is yet to be discussed by the Chamber of Deputies.

Ariel Guarco, president of Cooperar, the country’s national federation of co-ops, said the initiative failed to take into account the specificity of the co-operative model.

Speaking before the Senate on 13 November, Mr Guarco, who is also president of the International Co-operative Alliance, said co-operatives were not making profit but a surplus, reinvesting a large part of it into the business to improve services. They also depend on capital from members, and are unable to use funding from external investors.

Earlier in September Mr Guarco had told a meeting of agricultural co-operatives: “The State should treat co-operatives as non-for-profit companies. We have always contributed and even more so in difficult times, but our legal nature must be respected. We can never accept being taxed on earnings.

“We are not marginal enterprises. We are enterprises that represent 10 million people and provide services in all sectors. Co-operatives are not companies with social responsibility, we are the social responsibility made enterprise.”

Alejandro Russo, president of the Argentine confederation of mutual businesses, also raised concerns over the impact this legislation could have on co-ops’ and mutuals’ ability to provide services to members.

He said in a statement before the Senate Budget and Finance Committee: “It is punishing entities with greater wealth, whose only sin was to strengthen their assets to provide more security to their members and respond to eventual claims or requirements.”

Similar legislation calling for removing the exemption to pay tax on profit for co-operatives and mutuals was rejected by parliament last year.

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