ARGENTINA'S NEWSPAPERS NARROWLY ESCAPE TAX HIT

By: Mark Fitzgerald Papers Hit Hard By Recession


CHICAGO -- As much as Italian fashions and blood-red steaks
served at midnight, portenos have always loved poring over
newspapers at the kiosks that crowd every busy street in Buenos
Aires. These days, though, they're doing a lot more browsing than
buying.

There's one obvious reason: sticker shock. "Our papers are not
cheap in Argentina," Jose Claudio Escribano, subdirector of La
Nacion, said in a telephone interview. One of the nation's
largest papers, with a circulation of about 185,000 daily and
250,000 Sundays, La Nacion has a typical mix of cover
prices. It sells for the equivalent of $1 U.S. four days a week,
$1.20 on Tuesdays and Saturdays when it runs big special
sections, and $2.50 on Sundays.

Business everywhere is bad in Argentina, which is entering its
37th straight month of recession, in part because of an
overvalued peso fixed on a one-to-one exchange rate with the U.S.
dollar. Newspapers have been hit particularly hard.

At its annual meeting three weeks ago, the World Association of
Newspapers released figures showing total circulation of
Argentine dailies has declined 36% since 1996. By contrast,
newspaper circulation among its neighbors increased during those
years, by 7.5% in Chile and nearly 22% in Brazil.

Given these doleful trends, publishers were horrified when
popular Economics Minister Domingo Cavallo announced that May 1
the government would impose a 21% value-added tax (IVA in
Spanish) on the cover price of newspapers and other publications
-- and would double the existing IVA on advertising to 21% from
10.5%. These taxes would come on top of the IVA newspapers
already pay for newsprint and certain other supplies.

"To put taxes so high on newspapers would be to [encourage] the
decreasing of circulation and even to affect the freedom of
expression," Ra?l Kraiselburd said from his office in the Buenos
Aires suburb of La Plata, where he is editor and publisher of the
55,000-circulation daily El Dia.

That theme was taken up by the Miami-based Inter American Press
Association (IAPA), whose president, Danilo Arbilla of the
Uruguayan weekly B?squeda, forcefully condemned the tax as
"a pernicious measure against freedom of the press" that could
drive smaller papers out of business entirely.

For weeks, Cavallo held tough against the domestic and
international lobbying by rallying the public with the argument
that the news media should have to bear the same tax burden as
all Argentines. At the last minute, however, he reduced the cover
price tax to 10.5% and decided not to increase the ad tax. In
addition, the government allowed papers to apply the IVA in place
of certain payroll taxes. "In the end, the tax was neutral, so
newspaper companies have not raised their [cover] prices," La
Nacio?n's Escribano said.

"The result is all right, to now -- but who knows if Cavallo will
come back again for more tax?" Escribano asked.

After all, he said, every country on Argentina's border has a
higher IVA on newspapers -- and farther north, English-speaking
Guyana imposes a 35% value-added tax.



Mark Fitzgerald (mfitzgerald@editorandpublisher.com) is editor at large for E&P.



Related story:
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