Foreign Relations of the United States Diplomatic Papers, 1933, The American Republics, Volume IV

835.512 Insurance Tax/12

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

No. 2222

Buenos Aires, September 7, 1933.
[Received September 18.]

Sir: I have the honor to refer to my despatch No. 2190 of August 11 concerning the matter of the imposition by the Argentine Government of a tax on marine insurance written abroad, wherein I reported an interview with Dr. Iriondo, Interim Minister of Finance on this subject. Representatives of the insurance companies have told me confidentially that they had received indirect information to the effect that Dr. Iriondo had expressed an opinion subsequently to the effect that the law which is considered by the Department and by the insurance companies as objectionable was of very slight merit. Dr. Iriondo is no longer Acting Minister of Finance and his place has been taken by Dr. Piñedo.

Shortly after the accession of Dr. Piñedo, I received a communication from the Foreign Office, copies and translation of which are enclosed. This note professes to be in reply to the first brief memorandum which I left with the Minister for Foreign Affairs and it makes no allusion to the far more lengthy memorandum that I presented to Dr. Iriondo and to which I alluded in my despatch No. 2190 above referred to. The reply of the Minister of Finance does not attempt to face the more important aspects of this question, being mostly devoted to endeavoring to prove that foreign insurance companies should be taxed to compensate for the taxation imposed upon local companies. In the last paragraph, however, under Point 3 it is stated that the law is not yet in force and that in deciding upon the regulations putting it into effect, the recommendations of this Embassy in regard to maritime insurance can be taken into consideration.

In this connection, I might observe that no Government is willing to admit that it is in error and the Argentine Government is no exception; so that perhaps the last paragraph referred to is really the most significant part of the note. Inasmuch, however, as no reference was made to my more lengthy memorandum, I surmise that possibly the official in charge of drafting the note was likely favorable to the new law and submitted it to the Minister without his first studying the matter very thoroughly.

At any rate, I requested another interview with the new Minister of Finance which took place yesterday. I explained to him that the memorandum to which reference was made in his note had been supplemented by a longer one to which no reference was made and that I therefore took it upon myself to hand him a second copy for his study. I also pointed out that in his letter it was stated that the Argentine Insurance Associations were in favor of the new law, a statement which I compared with the one in my memorandum to the effect that the Argentine Insurance Associations on the 5th of April, 1932, expressed their opposition and stated that the tax would have “the absurd result that a person buying merchandise abroad assured by the seller with foreign insurance agents against the risk of a journey to the Argentine would find himself obliged to pay a tax for a motive that could not be explained, on merchandise while it was in transit outside of the Republic.”

I also stated that I presumed that the Argentine Government could hardly propose to levy a tax on merchandise outside of its jurisdiction. He agreed with me that this would be a difficult matter. I then said that according to estimates made by the insurance companies that from that portion of the tax which would fall upon merchandise in the Argentine, the returns would be negligible. I also said that the difficulties with the Customs Office in the importation of goods would be infinite inasmuch as the Customs would have the right to detain merchandise on which a policy of insurance could not be produced; further, that insurance was often effected by large foreign companies so as to cover their goods in transit all over the world and it would be necessary to prove to the Argentine Customhouse what portion covered Argentine business. I mentioned other considerations all of which were set forth at greater length in my memorandum, and also added that Great Britain, Holland, Switzerland and Norway were all protesting against this law. He said that my note was the first knowledge he had of the matter. I said that I hoped the law would not be put into effect and that it would be better still to have it revoked. The Minister said that my request, he thought, would be considered with considerable good will (con bastante buenavoluntad).

This, therefore, is where the matter rests for the present. Meantime, the new law has not been enforced.

Respectfully yours,

J. C. White

[Enclosure—Translation]⁵⁷

The Argentine Under Secretary of State for Foreign Affairs (Alcorta) to the American Chargé (White)

Buenos Aires, September 4, 1933.

Mr. Chargé d’Affaires: With reference to the memorandum from your Embassy dated July 25 last, I take pleasure in addressing myself to you with the object of making you acquainted with the following note received by this Chancellery from the Ministry of Finance of the Nation. It reads as follows:

“No. 313.

Mr. Minister: I take pleasure in replying as follows to the memorandum addressed to your Department by the Embassy of the United States of America which you transmitted in your note of July 25.

“1. Within the system of taxation imposed upon insurance companies, no distinction is made as to whether they are national or foreign companies, but as to whether the capital and the management of their activities are established in the country or abroad. In the first case, they pay 1.4% on the premium for general risks and 0.5% on the premiums of life policies, and, in the second case, 7% and 2% respectively. This system has prevailed for more than thirty years and when, on occasions, some foreign companies have considered the tax in the second instance as disadvantageous, they of their own accord have placed themselves in a position to be subject to the first above mentioned by merely establishing their management and capital in Argentina.

“2. The 7% tax on premiums for policies effected abroad (by companies which have no legal representation in the Argentine, that is to say, by those companies not comprised in the previous clause,) yields to an equally just consideration. Previous to the 19th of January 1932, when the Provisional Government imposed this tax by decree, such policies covering property or goods situated in or destined for the Argentine Republic escaped all taxation, by means of which fact these insurance companies enjoyed an evident privilege over those established or represented in the country. Law 11,582, of June 1932, did nothing but reproduce the conditions of the said decree.

“As is known, the companies established or represented in the country, whether national or foreign, are not only subject to taxation laws and laws of all kinds in force in the Republic, but their functioning is always developed with incalculable benefit for the local economy, while foreign organizations without any representation here operate freely on property or products pertaining to Argentina without returning to the country any of the benefit therefrom. It was the insurance associations, national as well as foreign, which demanded this measure, with the difference that they desired the tax to be one of three per mill on the total amount insured. The Government, considering that this desire was excessive, decided to fix a rate equal to that paid by the companies which in some form or other have a representation here. Even after establishing this equality in conditions, there still results an advantage in favor of those enterprises not established nor known in the country, and the real object therefore is not, as has been said, that of favoring the national insurance companies.

“3. As is recognized in the memorandum under consideration, the last mentioned tax on those goods destined to the country, has not as yet been put into force. It has been necessary to prepare regulations for the law, and the commission appointed to study the matter, composed of foreign insurance agents in part, has just made known its decision. In resolving the different points of the pertinent regulation, it will be possible to take into consideration those which have been suggested in the document presented by the Embassy of the United States in-so-far as relates to the characteristics of maritime insurance.

“I greet Your Excellency with the assurances of my highest consideration. Federico Piñedo.”

I avail myself [etc.]

Carlos Alberto Alcorta

57. File translation revised.