835.512 Insurance Tax/11

The Chargé in Argentina (White) to the Secretary of State

No. 2190

Sir: Referring to the Department’s instructions in regard to the imposition by the Argentine Government of a tax on marine insurance written abroad, and to my despatch No. 2172 of July 28, I [Page 787] have the honor to report that the interview which I therein stated that I would probably seek with the Interim Minister of Finance. Dr. Iriondo, after considerable delays due to his numerous preoccupations with two Ministries in his charge, took place today. Dr. Iriondo was evidently not conversant with the subject, although I had submitted a brief memorandum on the subject to the Ministry of Foreign Affairs, which the latter stated it had duly forwarded to Finance. I accordingly outlined the difficulties which the proposed tax would raise and left him an eleven-page memorandum in Spanish on the subject, based on data submitted by local insurance representatives. An English translation of this memorandum is enclosed herewith.

I doubt whether Dr. Iriondo will have time to do much in the matter himself, and it may well be necessary to visit the next Minister of Finance who will presumably occupy himself solely with that Department. However, as stated in my despatch No. 2172 of July 28, as the object is indefinite postponement, a delay in making a reply should not prejudice the case. I may add that I left a copy of my memorandum for the Minister of Finance with the Minister for Foreign Affairs also.

The Dutch Legation is likewise making representations and I supplied some data to it. The British have, I believe, an ample documentation on the subject but seem reluctant to admit that they have any instructions from their Foreign Office to protest. It was insinuated to me that perhaps this matter is being discussed by the British in connection with the Roca Agreement.56

Other Legations have expressed an interest but I do not so far know of any action taken except by myself and the Dutch.

Respectfully yours,

J. C. White

The American Chargé (White) to the Argentine Interim Minister of Finance (Iriondo)


As of date July 25 a memorandum was submitted to the Ministry for Foreign Affairs in regard to the project (Law 11,582 of June 1932) for imposing a tax of 7% on the premiums of insurance policies issued abroad covering properties or goods situated in or destined for the Argentine Republic.

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It is now desired to supplement that memorandum by additional considerations.

The suspension of Law 11,582, insofar as it concerns the tax upon insurance effected abroad on merchandise introduced into the country, was effected by a decree of February 20, dossier 3571–E–1932. This states that “in view of the importance of this question, within which interests of a world-wide nature are involved, it is necessary to carefully study the matter for the purpose of arriving at adequate regulations through the collaboration of those public departments best informed in the premises, together with the representatives of the commercial interests at stake.”

It appears that there are three different classes of underwriting institutions doing business in the Argentine. There are the insurance companies incorporated under Argentine law as Argentine companies. There are foreign insurance companies established in the Argentine and carrying on business through one or more branches, those branches having been registered in accordance with Argentine law. There are also insurance or underwriting organizations in every part of the world which insure their clients, the sellers of the goods residing outside of the Argentine Republic, and covering the shipments of merchandise destined to Argentina. These last-mentioned outside-foreign underwriters transact insurance business freely in every kind of risk and do not have any regular branch in Argentina. They have carried on business with the Argentine for many years unmolested. Upon the subject matter contemplated by the decree above mentioned they have not had an opportunity to express their views.

Insurance policies upon imported goods commence in general at the time when the goods leave the factory in the foreign country and covers the transit from the factory to the foreign port of shipment, and thereafter the sea voyage to an Argentine port, and generally also a short time in Argentina with the object of giving the buyer time to make his arrangements as regards insuring the goods himself within Argentine jurisdiction. This cover within Argentine jursdiction is limited in many policies by what is known as the “River Plate Clause,” which guarantees foreign underwriters free from certain claims; fire, etc., in warehouses in Argentina.

It will therefore be seen that the proposed taxation covers insurance upon a risk of which only a small part relates to Argentine jurisdiction.

The business of marine insurance upon imported merchandise which is intended to be taxed by the proposed regulation is not a business in which the Argentine companies compete with the foreign companies.

Practically the whole of the marine insurance upon imported merchandise is effected by the sellers with underwriters in the country of export, and it is worthy of note that the insurance companies, both Argentine and foreign established companies, carrying on business in [Page 789] Argentina, addressed on April 5, 1932, a petition to the Argentine Congress pointing out that they were strongly against the taxation of maritime insurance upon merchandise in transit to Argentina. The local underwriters in their aforesaid petition to Congress pointed out that such taxation would have “the absurd result that a person purchasing goods abroad which are insured by the seller with foreign underwriters against the risk of the voyage to Argentina will find himself obliged to pay a tax for an unexplained reason upon the goods whilst they are in transit outside of the Republic.”

In addition to the tax of 7% upon the premium there would be a stamp duty of fifteen centavos per thousand pesos upon the total volume of the policy.

When goods are dispatched from the foreign factory they are under the jurisdiction of the country of origin until they reach the sea-board, and thereafter they come under the jurisdiction of the nation to which the carrying vessel belongs and it is only when the vessel arrives in the River Plate that the merchandise, and consequently the insurance policy covering the same, comes within the jurisdiction of the Argentine Republic.

Under these circumstances it must be supposed that the Argentine Government would not seek to impose taxation upon merchandise or upon the insurance policies of merchandise before such merchandise should reach the River Plate, and consequently the proposed tax could only reasonably be held to apply to such part of the premium as corresponds to the risk within Argentine jurisdiction.

In view of the great varieties of insurance policies it is not possible to lay down a definite rule, but in general terms it may be stated that in respect of a policy upon goods imported into Argentine from Europe or the United States not more than, let us say, from one-tenth to one-fifth of the premium could correspond to the risk within Argentine jurisdiction.

Latest statistics indicate that the value of the merchandise imported into Argentina from foreign countries in the year 1932 was approximately eight hundred and fifty million paper pesos, and supposing that the whole of this were insured and that the average premium thereon amounted to approximately one per cent, this would give a total premium figure of about eight and a half millions. Supposing for the sake of illustration that as much as one-fifth of the total transit were reckoned as apertaining to Argentine jurisdiction, then one-fifth of 8,500,000 paper pesos, that is to say, 1,700,000 would be subject to Argentine taxation.

The 7% premium tax upon 1,700,000 paper pesos would thus yield, say 119,000 paper pesos, while the stamp duty upon the policies might be calculated to yield about 127,500, making a total gross receipt of less than 250,000 per annum in respect of the tax.

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The complete statistics for the year 1932 have not yet been published so that allowances must be made in the above figures for subsequent modifications, but even admitting a substantial margin for variations, it will be seen that the Government’s income to be expected from the tax under the new regulations would be more than counterbalanced by the great disorganization of international business which would be caused by the enforcement of this taxation as can be demonstrated by a simple example.

The business of sale of goods to be exported from a foreign country and imported into Argentina is in general carried out upon a basis of C. I. F. (cost, insurance and freight) under which system the foreign seller, having made his contract with a buyer in Argentina, despatches the goods from his factory or his plant, and once the goods leave the possession of the seller they travel for the account and risk of the Argentine buyer.

Throughout the whole of the journey from the foreign factory to the receiving warehouse in Argentina the risk of the goods is taken care of by the insurance policy.

Supposing that a casualty should happen during the course of the voyage, the Argentine buyer might refuse to take up the shipping documents, and the only safeguard of the foreign seller would be the insurance policy. For this reason, although theoretically under the C. I. F. system the obligations of the foreign seller terminate when he has despatched the goods from his own premises, yet in practice he must depend upon the good faith and financial reliability of the insurance company which covers the risk during the transit. For this reason it is a certainty that the foreign sellers will not relinquish the rights which are given to them under, the C. I. F. system to insure the goods in a company of their own choosing.

Furthermore banks and other financial institutions are frequently called upon to lend money upon the documents of title of goods in transit and they equally require that the goods should be insured in a company of international reputation.

This insurance of goods in transit is of an international character and the Argentine insurance companies are not engaged in this class of business and have expressly stated in their memorial of April 5, 1932 that they do not desire taxation to be imposed by the Argentine Government upon marine insurance.

It is therefore clear that the tax leviable under the new proposed regulations will not assist Argentine national insurance and will not bring in any considerable amount of revenue to the Argentine Government, whilst on the other hand it will seriously hamper international business dealings in so far as concerns goods sold by foreign countries to Argentina, as can be shown by a few simple instances.

In many cases goods shipped to Argentina are insured by the exporter under “floating policies” for large amounts on which shipments [Page 791] to all parts of the world are declared seriatim by the assured. No policies are issued for the individual shipments, but an insurance certificate is often employed for banking purposes. The premium paid is seldom stated in such certificates, and in very many cases it would entirely upset the course of business dealings if a declaration of the premium were required to be made.

In other cases where the goods are covered by a voyage policy, business usages or Government regulations, make it desirable that the original policy should be retained in the country of shipment and a certificate transferable by endorsement goes forward with the goods. In this case also the receiver in Argentina has no knowledge of the premium paid nor of other particulars upon which he would be required to give information to the Argentine authorities under the new regulations before he could withdraw his goods from the customs house.

The new regulations provide that the goods cannot be withdrawn from the Argentine custom house until the duty has been paid, which means a further complication of the customs house formalities, with the result that goods will be delayed in the customs house and serious disorganization will be caused.

Furthermore it will be difficult and perhaps impossible to arrive at an agreement with the authorities as to the percentage of the premium which relates to the risk within Argentine jurisdiction and the percentage relating to the risk upon the high seas and in the jurisdiction of the country of origin.

At the present time when the nations are endeavoring as far as possible to eliminate the artificial barriers and difficulties which have been created in hindrance of international trade, it would appear particularly unfortunate were a new regulation such as this to be brought into force, which would create a new and additional impediment in disturbance of commercial communications between Argentina and foreign countries.

In view of the foregoing and of the detriment likely to be caused to insurance companies of the United States of America, the Washington Government has directed me to express the hope that means may be found to prevent the application of the pertinent portions of Law 11,582 of June 1932.

  1. For correspondence concerning the Anglo-Argentine (Roca) Agreement, see pp. 722 ff.