Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. Print
April 06, 1998 01:00 AM

ARGENTINA'S GOVERNMENT TAKES THIRD OF FUND PROFITS

Thomas V. Ciampi
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    BUENOS AIRES -- Direct investment funds created in 1993 by the Argentine government to promote economic development face almost assured extinction because of a decree imposing a 33% income tax on all profits.

    Leaders of the industry have banded together to force retraction of the decree, issued by the government of Carlos Menem in late February. Investors in the funds help finance such things as the planting of crops or the purchase of building materials; returns are based on the sale of the finished products.

    Direct investment funds -- which can be for periods as short as one year or as long as 20 years -- have proven to be attractive diversifiers to Argentine public pension plan funds, which tend to be heavily weighted in public bonds and local stocks.

    While the first sponsors of the funds were smaller firms with farming backgrounds, large banks such as Banco Santander have recently entered the fray. Santander has revealed plans for agricultural funds, as well as real-estate funds in the near future.

    The decree sought to define more precisely a gray area in the law that allowed these funds to qualify for the same tax treatment as mutual funds investing in stocks, bonds and other traditional securities.

    Since its creation in 1992, the local mutual fund law has exempted traditional mutual fund profits from income taxes. When the law creating direct-investment funds was introduced a year later, it was first assumed that these products should have the same tax treatment. But since the launch of the first of these funds in the past two years, they have been looked at as potential revenue targets of the local tax bureau.

    Carlos Silvani, director, Direccion General Impositiva, said the exemption was unacceptable because these funds have "productive activities" that compete directly with other entities -- such as planters or building developers -- whose profits are subject to the 33% income-tax rate. Exempting the funds from the burdens of the tax was creating an unfair competitive situation, he said.

    To fight the decree, an ad-hoc committee consisting of members of the eight fund managers and the accounting and legal entities working with the budding sector are planning an appeal to the Justice Department, which is notorious for its rubber-stamping of most initiatives launched by the executive branch.

    The direct-investment fund industry, which has attracted more than $100 million primarily from pension funds and institutional investors, argues in favor of an exemption because funds must pass through a burdensome regulatory process before they can be launched.

    For example, each fund needs to obtain a credit rating; hire an administrator, custodian and brokers; undergo periodic audits; and mail reports to investors -- all adding to costs that everyday corporations don't have to bear.

    With the prospect of a third of potential fund profits being lost to taxes, some are beginning to worry about the viability of such funds, which were created to spur economic activity.

    But the government's need to avoid cries of favoritism will make it difficult to heed the claims of fund managers.

    The decree is one of a slew of revenue-raising measures the government has introduced in the past two months in an attempt to close a widening budget gap.

    For example, the Menem government has raised the ire of a broad swath of the public by calling for the assessment of a 21% value-added tax on cable television and on monthly HMO-type health plans.

    The decree will affect results of the current fiscal year, which for most agricultural funds ends in May or June. When the tallies are made on this year's crops, the government will be awaiting its check for a third of the profits.

    The industry is resentful, noting that one of the principal benefits of the funds was their income-tax exemption.

    "The government wants to change the rules retroactively and assess a tax on investors who were exempt at the time they acquired their shares," said Horacio Crespo, accountant with Harteneck, Lopez & Cia., the local affiliate of Coopers & Lybrand.

    Others said the decree contributed to "judicial insecurity," since it was hurriedly issued without taking time to hear the industry's viewpoint or pass through the Congress.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    The Future of Infrastructure: Building a Better Tomorrow
    Fulcrum Issues: Equity Returns and Inflation — Choose Your Own Adventure
    What Matters Most in Considering a Private Debt Strategy
    Why pursue direct lending in the core middle market?
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing