资源描述
WT/DS26/15
WT/DS48/13
Page 1
World Trade
Organization
WT/DS155/10
31 August 2001
(01-4175)
ARGENTINA – MEASURES AFFECTING THE EXPORT OF
BOVINE HIDES AND THE IMPORT OF FINISHED LEATHER
Arbitration
under Article 21.3(c) of the
Understanding on Rules and Procedures
Governing the Settlement of Disputes
Award of the Arbitrator
Florentino P. Feliciano
WT/DS155/10
Page 25
I. INTRODUCTION
1. On 16 February 2001, the Dispute Settlement Body (the "DSB") adopted the Panel Report WT/DS155/R, WT/DS155/R/Corr.1.
in Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished Leather ("Argentina – Hides and Leather").WT/DS155/5.
At the DSB meeting of 12 March 2001, Argentina informed the DSB, pursuant to Article 21.3 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU"), that it would implement the recommendations and rulings of the DSB in this dispute and that it would require a "reasonable period of time" to do so, under the terms of Article 21.3 of the DSU.
2. In view of its inability to reach an agreement with Argentina on the period of time reasonably required for implementation of those recommendations and rulings, the European Communities requested that such period be determined by binding arbitration pursuant to Article 21.3(c) of the DSU.WT/DS155/6.
3. By joint letter of 12 June 2001, Argentina and the European Communities notified the DSB that they had agreed that the duration of the "reasonable period of time" for implementation should be determined through binding arbitration, under the terms of Article 21.3(c) of the DSU, and that I should act as Arbitrator.WT/DS155/8.
The parties also indicated in that letter that they had agreed to extend the time-period for the arbitration, which shall be completed no later than 90 days after the date of the appointment of the arbitrator.Ibid.
Notwithstanding this extension of the time-period, the parties stated that the arbitration award would be deemed to be an award made under Article 21.3(c) of the DSU. My acceptance of this designation as Arbitrator was conveyed to the parties by letter of 12 June 2001.
4. Written submissions were received from Argentina and the European Communities on 3 July 2001, and an oral hearing was held on 18 July 2001.
II. ARGUMENTS OF THE PARTIES
A. Argentina
5. Argentina requests the arbitrator to fix the "reasonable period of time" at forty-six months and fifteen days, so that that period of time will expire on 31 December 2004.
6. Argentina submits that the text of Article 21.3(c) of the DSU makes it clear that the 15-month period provided as a guideline is merely indicative. Article 21.3(c) speaks of the possibility of fixing a period of longer than 15 months for the implementation of the recommendations and rulings of the DSB. According to Argentina, the circumstances in this particular dispute warrant the granting of a period longer than 15 months for the implementation of the DSB recommendations and rulings.
7. Since 1992, Argentina has been working on a programme to combat tax evasion and reform its tax system. The cornerstone of this programme is the system of percepciones and retenciones applied to the Impuesto al Valor Agregado (the "IVA") and the Impuesto de Ganancias (the "IG"). This programme ties in, both economically and legally, with the objective of reducing the fiscal deficit. The programme has been explicitly backed by various international financial agencies, in particular, the International Monetary Fund (the "IMF"). The agreements concluded with the IMF set out a number of quantitative targets, notably for the levels of fiscal deficit, primary spending and public debt, that are monitored on a quarterly basis throughout the period covered by the programme. Failure of Argentina to achieve these targets would preclude disbursement of the funds otherwise available under the agreements.
8. Argentina stresses that its fiscal position has seriously deteriorated over the past years, essentially as a result of the fall in tax revenue brought about by the economic recession that began in the third quarter of 1998 in the wake of the 1997 "Asian crisis". In this context of economic recession, Argentina sought to reduce the deficit by increasing taxes, and reducing primary spending. These efforts must continue this year and over the next few years.
9. Under these circumstances, Argentina argues that legal and fiscal difficulties would result from eliminating the extra financial burden imposed on importers as a result of the advances on the IVA and IG at rates higher than those applied to domestic transactions, through a "downward equalization" of the rates applied to imports.
10. Argentina, at the same time, contends that although in theory it would be possible to comply with the findings of the Panel through an "upward equalization" of the rates of the said payments on account, that is, by increasing the rates for domestic transactions, the effects of such a measure on Argentina's current situation, when the country is trying to recover from recession, would make the measures politically and economically unfeasible. Similarly, the introduction of a system of refunding interests to importers, would involve setting up a very complex administrative mechanism to ensure accurate calculation of interest due. Moreover, it would open the door to complaints from the relevant domestic sectors, complicating further the fiscal situation.
11. Argentina submits that the structure of its tax system justifies the requested time-limit. Under Argentina law, there is a set of regulations governing the conditions and time-limits for action by the national authorities in the domestic sphere. In the external sphere, there is a set of payment obligations and commitments assumed by Argentina that can only be honoured by strict compliance with the laws in force: the National Budget Law No. 25,401 of 12 December 2000 and the Fiscal Solvency Law No. 25,152 of 15 September 1999.
12. Argentina describes the process by which its annual budget is enacted as follows. In September of each year, the Executive submits to the Congress of the Nation its draft budget for the following financial year, containing estimated income and expenditure authorizations. First, it is examined by the Budget and Finance Committee of the Chamber of Deputies. Once that Committee has issued its opinion, the draft budget is examined by the Chamber, and upon approval by the Chamber of Deputies, it is passed on to the Budget and Finance Committee of the Senate before final transmission to the Senate. When it has been approved by both Chambers, it is promulgated by the Executive, which has partial veto authority. Once this process has been completed, the National Budget becomes a Law of the Nation, and can be amended only by another national law.
13. The text of the law is accompanied, inter alia , by a number of annexed tables providing a breakdown of the budgetary information (income, expenditure, financing, etc.) according to the organization of the national administration and its decentralized bodies. The tax revenue forecast is broken down according to the different taxes (IG, IVA, Personal Property Tax, etc.) and set out in detail in the Executive's annual letter of submission to the National Congress.
14. The projected amounts are then incorporated in the final estimate of income that is ultimately approved by Congress. The specification of these amounts, once they are included in the budget, forms part of the Law and make up the estimate of income for the entire financial year; in other words, they can only be amended by another law, since any change would involve a consequential change in the expenditure/income equation and the deficit level already approved.
15. Argentina further explains that, at the same time, the tax system is tied to the Law on Fiscal Solvency which provides, inter alia, for the progressive reduction of the national public deficit with a view to balancing the budget by 2005. This Law establishes target deficit levels for each year, and any change in the deficit levels indicated would also require a legislative amendment. Because of the relationship between the Law on Fiscal Solvency and the Budget Law, estimated income and expenditure will have to be adjusted in order to reduce the deficit to attain the target prescribed. The procedure will have to be applied by law in each of the succeeding financial years until the process is completed in 2005.
16. The Law on Fiscal Solvency also lays down the obligation to include in the letter of submission of the annual budget a multi-year budget covering at least three years. In other words, the Executive must submit to the Congress, together with the budget for the coming year, a multi-year projection containing estimates of income on the basis of existing tax rates which means calculating the advances in the form of retenciones and percepciones needed in order to meet the objectives of the Law on Fiscal Solvency for 31 December 2004.
17. As a result, in the view of Argentina, it is not possible to amend the budget currently in force without altering its deficit target as well as the deficit target of the Law on Fiscal Solvency. Nor is it possible, in the current situation, to alter the system of customs levies. That system is not only linked to imports, but is also part of a comprehensive scheme to combat tax evasion which includes levies on purchases in the domestic market and the retenciones regime. The system makes it possible to maintain better monitoring of the obligations of taxpayers while providing them with adequate incentives to declare and regularize their operations.
18. Argentina believes that a single and immediate modification of this regime involving a reduction of the rates of levies on imports would clash with the objective of the Law on Fiscal Solvency, since it would involve a significant loss in tax revenue. Moreover, the agreement in force with the IMF provides for reduction in the deficit over the next few years in line with the Law on Fiscal Solvency. This agreement is binding on the Argentine Government, is currently in force, and specifically takes up the deficit reduction commitments contained in the Law on Fiscal Solvency. Any amendment to the IMF agreement would require renegotiation, and the fiscal targets are determined in compliance with the Law on Fiscal Solvency.
19. The Argentine public debt structure includes commitments for short, medium and long-term interest and capital payments. Argentina undertook a major debt equity swap in order to ease the burden imposed by the sequence of debt maturities. Having conducted this swap, it is particularly important in view of the rescheduling of maturities, involving a considerable medium-term fiscal cost, to ensure solvency during the stage covered by the Law on Fiscal Solvency extending up to 2005.
20. Argentina submits that Article 21.2 of the DSU, which speaks of "interests" of developing countries, ties in with the general provisions of Article 21.3(c). The "particular circumstances" of Argentina in this case are a combination of legal obligations that can only be amended through an act of the National Congress, as in the case of the Budget Law and the Law on Fiscal Solvency, and of international obligations such as the IMF commitments.
21. Argentina recalls that according to past arbitral awards, Article 21.2 of the DSU "… enjoins, inter alia, an arbitrator […] to be generally mindful of the great difficulties that a developing country Member may, in a particular case, face as it proceeds to implement the recommendations and rulings of the DSB."Award of the Arbitrator under Article 21.3(c) of the DSU, Chile – Taxes on Alcoholic Beverages ("Chile – Alcoholic Beverages "), WT/DS87/15, WT/DS110/14, 23 May 2000, para 45.
In the present case, Argentina's economic interests as a developing country and its fiscal solvency are at stake. This is clearly reflected in the capital debt maturity schedule throughout the period requested as a reasonable period of time (up to 2005). Likewise, owing to the size of the debt involved, and in particular to the impact of any failure to comply with the IMF Agreement, Argentina would have great difficulty financing an increase in its budget deficit.
22. Argentina maintains that the impact of any change in the rates would be significant. The retenciones and percepciones are a fundamental element in maintaining an adequate tax collection level. Through this mechanism, $1,600 million were collected in 2000, i.e. more than 18 per cent of the total taxes collected in connection with foreign trade. During the same year, IVA and IG collected at customs accounted for more than 7 per cent and 6 per cent respectively of the total amount collected for each tax. To cushion the impact of this loss of revenue, a procedure involving progressive equalization sector by sector is necessary. Argentina's "interest" as a developing country, therefore, consists in avoiding an abrupt implementation without a transition period, in the space of a single financial year, that would jeopardize the objective of reducing the deficit.
23. Against the foregoing background, Argentina, requests that consideration be given to its "interest" in being granted a period of time that would enable it to implement the recommendations and rulings of the DSB in this dispute "progressively", (i.e., by instalments, as it were) over a period of three financial years beginning in 2002 and ending on 31 December 2004.
B. The European Communities
24. The European Communities notes that the measures in dispute are contained in a series of Resoluciones Generales issued by the Dirección General Impositiva (the "DGI"). In 1997 the DGI was merged with the Dirección General de Aduanas in order to create the Administración Federal de Ingresos Públicos (the "AFIP"). The AFIP is an "autarchic entity", which operates autonomously, under the general supervision and control of the Minister of Economy. The Chief of the AFIP is empowered to issue new Resoluciones Generales and to amend existing ones.
25. The European Communities submits that in order to comply with the recommendations and rulings of the DSB, Argentina must take one of the following actions: equalize the rates applied to imports and to internal sales (including the zero rates); and/or provide for the refund to the importers of the additional costs imposed by the higher rates on imports, or establish a similar compensation system. The above actions will require, respectively, amending the existing Resoluciones Generales or adopting new ones.
26. The European Communities observes th
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