Farmers poured into the streets of Buenos Aires in protest on the recent irrational tax hike on their agricultural produce. The farming community felt that their better times of making profits are thwarted by the government in the name of offsetting the soaring food prices.
The introduction of higher tax on farm export commodities is to discourage exports, and the commodities to find its way to local markets which is expected to bring down the prices. This is the first time, since the worst economic devastation of 2002, that Argentina has witnessed such a demonstration.
Farmers after years of suffering from low export prices of commodities and other natural calamities were able earn profits only in recent times. Initially the government imposed export taxes to 20% and it has gone up to 40% for certain commodities.
Majority of the citizens of Argentina depend on farming for their livelihood. Regardless of taxes, the exports grew to bring back cheer and happiness to farmers as well as the economy. But the farmers are peeved by the decision to continuously increase tax by the new president Cristina Fernández de Kirchner.
Farmers’ leaders said that she had completely let down the farmers, barely being three months in office. Ms Fernández was elected last year only after her husband, Néstor Kirchner, chose not to stand for a second term. To support her campaign, Mr Kirchner ramped up spending on pensions and public works. The new government’s decision is to restore the fiscal surplus and thereby contain inflation.
Farmers stated that the protest will continue until the tax is cut because the government charges income tax on top of the export levies, around 44% of the revenues from soyabean sales will now end up in the state’s coffers. Planting, harvesting, transporting and the cost of land would gobble up another 50%, leaving just six cent profit.
To the small-time farmers the tax rise means a big plunge in their income and if crops fail, some would go out of business too. Ms Fernández who has the support of urban poor is most unlikely to climb down easily from the decision, yet the government may have to make some concessions to avoid any escalation in protests.