Export Duties

Since 2002, the Federal Government tax policy has included the application of export duties (usually called "retenciones") on the exports of several goods, especially on crude oil and byproducts, natural gas, meat, certain crops, oilseeds and vegetable oils. In all these cases, this tax has been regulated by the issuance of different hierarchy rules, enacted by the administration (decrees and ministerial resolutions).

In spite of criticisms and complaints; in practice the sectors reached by this tax burden have been bearing its application.

By the end of last year and the beginning of the present one, the Ministry of Economy and Production established new schemes for the implementation of export duties on hydrocarbons (Resolution No 394/07), cereals and oilseeds (Resolution No 125/08, as amended), and LPG and gas (Resolution No 127/08).

Generally, these new schemes include a significant increase in its rates and a sliding scale structure, according to which the increase of the prices leads to the implementation of higher tax rates.

As is known, the agricultural sector has resisted the implementation of this new scheme, resorting to protest measures, sales suspension, and other demonstrations of disapproval on routes, etc.

Such protests are accompanied with objections of legal nature.

Certainly, the argument made in the sense that the rules enacted violate the principle that requires that any tax must be approved by a law passed by Congress carries weight. According to the provisions of Sections 4, 9, 17, 75 paragraph 1 and 99 paragraph 3 of the Federal Constitution, it is clear that Congress is the only Branch invested with the authority to establish export duties.

In its resolutions, the Ministry of Economy and Production invokes in its favor provisions of the Customs Code (approved by Law NO 22,415), in which Congress delegated in the Executive Branch the power to tax, deduct and, in general, modify export duties. 

Regarding hydrocarbons, LPG and gas, the Ministry of Economy and Production invokes the legislative delegation contained in Laws No 25,561 and No 26,217.

The analysis of the constitutional validity of these rules, by which Congress delegated tax powers to the Executive, must be done according to Section 76 of the Federal Constitution which establishes as general criteria the prohibition to delegate legislative powers in the Executive Branch, but, at the same time, also establishes exceptions, whose scope of application has no precise limits.

Section 76 was incorporated during the 1994 constitutional amendment. Thus, the issue has not been finally decided on by the Federal Supreme Court. However, in cases decided prior to 1994 concerning similar issues, the delegation was ruled unconstitutional, together with the actions of the government pursuant to such delegation.

Assuming hypothetically that the delegation were valid, the rules issued by the administration would also be questionable, because the “sliding scale rate” is an improper exercise of the delegated powers, since it substantially modifies the structure of the export duties. The law only contemplates the application of a single and fixed rate on the value of the exported products.

Additionally, the argument regarding the confiscatory nature of tax duties cannot be discarded. This argument relies on old precedents of the Supreme Court according to which taxation is unconstitutional when it becomes in fact a taking of a substantial part of the income or the capital of the taxpayer. However, also in this case, the court precedents have relative value because they do not refer to export taxation but to other kind of tax claims.

In case of exports to countries of the MERCOSUR, in accordance with The Treaty of Asunción and with many court precedents the export duties are not admissible. However, this issue has not yet been decided on by the Supreme Court.

The judgment issued by the First Instance Federal Contentious Administrative Court No.10, in “Gallo Llorente, Santiago Emilio y otro c/ Estado Nacional –MEyP–”, from June 5, 2008 is particularly relevant.

This judgment contains a precise explanation of the due process of law in tax matters: “The constitutional reserve of formal law for the imposition of taxes is (...) absolute, and leaves no place to waive the intervention of the Congress”. (...) “...neither a Decree from the Executive Branch, nor even less a resolution enacted by the Ministry of Economy and Production can -without legal support- validly create or modify, the essential elements of a tax charge” (...) “...in the current legal order, the solution to implement the modifications made by the challenged resolutions, is not the correct one. (...), only the Federal Congress can do it; its powers in that order are exclusive and exclusionary”.

The President reacted by requesting Congress to ratify the resolutions of the Ministry of Economy and Production which set the export duties on grains and oilseeds. The draft bill provides that the legislative ratification is sought notwithstanding the validity of the regulations being ratified and of the delegation of powers, including the above referred Section 755 of the Customs Code.

If Congress approves this bill, objections regarding the violation of due process of law would be overcome, but only concerning the future application of the expressly ratified rules of the Ministry of Economy. The objections concerning the export duties’ confiscatory nature would remain.

The possible ratification of the delegation of powers contained in Section 755 of the Custom Code would not end the discussion regarding the admissibility of such delegation. It would still be necessary to analyze the validity of the scope of the delegation powers under Section 76 of the Constitution, which limits the ability of Congress to delegate its legislated powers.