Energy Resources in Argentina:
Analysis of Income
Marina Recalde
Considerations Regarding Primary Distribution ( ...continuation )

The mechanism for local states to appropriate income has been outlined in Hydrocarbon Law 17.319 since 1967, in Articles 12, 59-65 and 93. According to what is established in this law, the concessionary of an area must pay a monthly fee to the National State equivalent to 12% of the gross product, and the National State acknowledges participation in said activity for the local regions within whose limits deposits are being exploited. In this way, although the Nation is the active agent, the final destination is the region where the resource is found. This method of income appropriation by the region where the resource is located is independent and existed prior to the current situation, valid based on Law 24.145, which acknowledges that regions own their deposits.19 Moreover, the regions collect income taxes from the Gross Income Tax (3%).

The other category of appropriated income is private income, which consists of income appropriated by consumers and producer companies. The consumers appropriate a percentage of the income due to price differentials, when they exist, between the international price and the sale price of the resource at national level. If the differential (PINT – PNAC) were negative, the opposite process would be observed, and there would be transference of income from the consumers to the hydrocarbon income, appropriated by agents remaining in the energy chain. Finally, producer companies, whether state-run or private, appropriate the leftover income, which is added to the percentage of profit.

Although important, analysis of secondary distribution in Argentina is very difficult based on the available information. As Zapata and Vega (2008: 8) mention, State participation in income depends on a complex tax system derived from powers at all levels of government, laid out in the National Constitution or in federal agreements, the majority of which do not have specific identification and their scope is unknown. Although income collection through taxes has not been counted for this study, much like Campodónico (2008: 35-36), it is important to note that various authors do take it into account, especially to estimate secondary distribution carried out by the State. As such, in terms of taxes on the sale of liquid and as fuels, 21% of money raised goes to the Social Security System, and the rest is distributed among the regions and the Federal Treasury, with specific contributions to the National Housing Fund (fonavi, Fondo Nacional de Vivienda), the Federal Highway Fund, the Water Infrastructure Fund, the Transportation Fund, the Electrical Infrastructure Fund and the Domestic Electrical Development Fund. Collection corresponding to the vat and Earnings Tax (profits) is distributed between the national Treasury, the provinces and the National Security System, according to the National Law for Federal Co-Participation (Zapata and Vega, 2008: 14).

Figure 3 and Table A3 in the Appendix show the results obtained by estimating primary distribution. These results match what Kozulj (2005: 42-45) presented, although these two differ to a certain extent in the sense that there have recently been problems in obtaining information, especially from the Ministry of Energy. This has made an exact estimate of the distribution very difficult. The main differences are due to the fact that the authors find greater income appropriation from the National State and less participation from the producers. This aspect might owe to the fact that while the studies mentioned do estimate oil income, here we present the results of combined hydrocarbon income. The results of preliminary estimates of oil income, without taking into account gas income, match the rest of the studies, presenting a drop in the percentage of oil income appropriated by producers between 2004 and 2007 (from 39% to 27%), even as the participation of consumers and the National State rose during this time period (Recalde, 2009: 26-27).

Figure 3. Distribution of Combined Income Among Principal Actors of the Hydrocarbon Chain
Figure 3
Source: Prepared by the authors.

19 For further details regarding this change in the legislation, refer to Recalde (2010), chapter iii, section 3.2.