-- the Law on the IVA (Ley del Impuesto al Valor Agregado) (the "IVA Law"); ¹²⁶

-- the Decree 692/98 implementing the IVA Law¹²⁷ (the "IVA Regulation"); and

-- the resolutions (resoluciones) issued from time to time by the Administración Federal de Ingresos Públicos - Dirección General Impositiva (the "AFIP-DGI").

6.2 The types of transactions subject to the IVA include, inter alia, the sale of goods within the Argentine territory¹²⁸ and the definitive importation of goods into that territory.¹²⁹ In the case of imports, the IVA is collected together with any applicable import duties.¹³⁰ In the case of internal sales, the seller must charge the IVA to the purchaser¹³¹ and then pay the amounts so collected to the Treasury on a monthly basis,¹³² after deducting therefrom any IVA paid on its own purchases and imports during the same period.¹³³

6.3 The IVA rates applicable to both imports and internal sales are the following:¹³⁴

 

6.4 Taxable persons whose annual sales do not exceed a certain amount may choose not to register themselves with the tax authorities.¹³⁵ Non-registered taxable persons (responsables no inscriptos) are dispensed from making direct payments to the Treasury in respect of their internal sales.¹³⁶
 
6.5 The IVA Law confers to the AFIP-DGI the authority to regulate the "collection at the source" (percepción en la fuente) of the IVA.¹³⁷ On that basis, the AFIP-DGI has issued Resolutions 3431¹³⁸ and 3337,¹³⁹ which provide, respectively, for the "collection at the source" of the IVA on the importation of goods and on certain internal sales.

B. ADVANCES ON THE IVA

1. Collection of the IVA on imports

6.6 Resolution 3431 provides that, where goods are definitively imported into Argentine territory, the customs authorities must "collect" (percibir) an additional amount, besides the ordinary IVA due on that import transaction. This advance on the final IVA liability may be credited against the ordinary IVA due on the subsequent re-sale of the good in cases in which the importer is a registered taxpayer.¹⁴⁰ Where the importer is a non-registered taxpayer, the additional amount cannot be credited because non-registered taxpayers are dispensed from making direct payments to the Treasury in respect of their internal sales. Currently, the advance on imports is collected at the following rates:¹⁴¹

6.7 The above rates are applied on the same base as the ordinary IVA,¹⁴² so that the following rates are charged at import:
 

6.8 The advance IVA is collected on all import transactions, with the following exceptions:¹⁴³

- re-importation of goods exempt from import duties; ¹⁴⁴

- imports of goods intended for the private use or consumption of the importer; ¹⁴⁵

- imports of so-called bienes de uso, i.e. goods intended for use in the economic activity of the importer,¹⁴⁶ except in the case of imports made by non-registered taxpayers; and

- imports of live bovines, under certain conditions.

2. Collection of the IVA on internal sales

6.9 Resolution 3337 provides that where certain categories of persons sell goods to a registered taxpayer they must collect (percibir), besides the ordinary IVA, an advance amount.¹⁴⁷ For internal sales, the advance amount, paid on account of the final IVA liability, may be credited by the purchaser of the goods against the IVA due on the re-sale of the goods.¹⁴⁸

6.10 The applicable rate on all internal transactions subject to the advance IVA is currently at 5 percent.¹⁴⁹That rate is applied on the same tax base as the ordinary IVA.¹⁵⁰ Thus, the overall IVA rates charged on internal sales are the following:
 

6.11 The persons required to collect the advance IVA on internal sales (the agentes de percepción) are: ¹⁵¹

- the central Government, including its autonomous agencies; ¹⁵²

- the companies listed in Annex I to Resolution No 18/97; ¹⁵³

- the exporters included in a list published in the Official Journal by the AFIP-DGI; ¹⁵⁴

- the markets of grains; and

- the consignatarios de hacienda and auctioneers.

6.12 By way of exception, no payment on accounts are made on, inter alia, the following internal transactions:

- sales of bienes de uso; ¹⁵⁵

- sales to agentes de percepción; ¹⁵⁶

- sales to financial entities subject to Law No 21526 (such as e.g. commercial banks,
  investment banks, mortgage banks and savings banks); ¹⁵⁷

- sales to non-registered taxpayers; and

- sales where the amount of the tax collected would be lower than Pesos 21,30. ¹⁵⁸

C. THE IG

6.13 The IG is an annual tax on income, which applies to both natural and juridical persons. It is regulated in:

- the Law on the IG (Ley del Impuesto de Ganancias) (the "IG Law");¹⁵⁹

- the Decree 1344/98 implementing the IG Law;¹⁶⁰ and

- the Resolutions issued from time to time by the DGI - AFI.

6.14 The IG is levied on all sources of income,¹⁶¹ including the profits derived from the sale of merchandise and other movable property, both domestic and imported. ¹⁶²

6.15 Currently, the profits derived from the exercise of an economic activity by a juridical person are taxed at the rate of 35 percent.¹⁶³ In the case of natural persons, the rate increases in proportion to the amount of taxable income.¹⁶⁴  In both cases, the rate applicable is the same, irrespective of whether the profits are obtained with the sale of domestic or of imported goods.

D. ADVANCES ON THE IG

1. Collection of the IG on imports

6.16 Resolution 3543¹⁶⁵ provides that the customs authorities shall "collect" (percibir) a certain amount on account of the IG when goods are definitively imported into Argentine territory.¹⁶⁶ The amount so collected can be credited against the IG due by the importer in the same fiscal period.¹⁶⁷ The advance IG is collected on all import transactions, with the following exceptions:

• the re-importation of goods exempt from import duties;¹⁶⁸ and

• the importation of bienes de uso.¹⁶⁹

6.17 The rate applicable is 3 percent.¹⁷⁰ By way of exception, in the case of imports for the importer's own use or consumption, the rate is 11 percent. ¹⁷¹

2. Collection of the IG on internal sales

6.18 Resolution 2784¹⁷² provides that certain taxable persons (the so-called agentes de retención) must withhold and pay to the Treasury a certain amount when making a payment subject to the IG to another taxable person. That amount can be subsequently deducted from the IG due by the person receiving the payment.

6.19 The transactions subject to withholding include the internal sale of the following categories of goods:¹⁷³

- merchandise for resale, raw materials and materials;¹⁷⁴

- processed goods;¹⁷⁵

- goods in process;¹⁷⁶

- livestock;¹⁷⁷

- cereals, oleaginous, fruits and other agricultural produce; ¹⁷⁸

- depreciable movable property;¹⁷⁹ and

- other goods falling within Article 65 of the IG Law;.

6.20 Monthly payments below Pesos 11242.70 are not subject to withholding.¹⁸⁰ In addition, no IG is withheld if the amount that would have to be withheld is less than Pesos 3.75.¹⁸¹ No equivalent minimum threshold exists for IG advances on imports.

6.21 The agentes de retención are listed in Article 3 of Resolution 2784. That list includes most forms of juridical persons. Natural persons are required to withhold the IG only where they make a payment to a taxable person as a result of the exercise of an economic activity. ¹⁸²

6.22 The applicable withholding rates are 2 percent in the case of payments made to registered taxpayers, and 4 percent in the case of payments made to non-registered taxpayers. ¹⁸³
 

VII. CLAIMS BY THE PARTIES

7.1 The European Communities requests the Panel to find that:

- the additional IVA on imports and the advance IG on imports are inconsistent with Article III:2, first sentence, of the GATT 1994.

7.2 Argentina requests the Panel to

- find that the "payment on account" of the value-added tax (IVA) and the gains tax (IG) are consistent with the first sentence of Article III:2 of the GATT 1994;

- alternatively, in the event that the Panel rejects the above petition, Argentina requests that it find that the "payments on account" are a measure covered by the provisions of Article XX:(d) of the GATT 1994.
 

VIII. MAIN ARGUMENTS

A. ARTICLE III:2 OF THE GATT 1994

8.1 The European Communities claims that tax rules enacted by Argentina in relation to the country's value-added tax (the so-called IVA law) and the tax on gains (the so-called IG law) violate Article III:2, first sentence, of the GATT 1994, in that they impose a higher tax burden on imported products than on like domestic products.
 
8.2 Argentina contests the European Communities claim and argues that the IVA and IG laws treat domestic and like imported products the same. These tax rules do not result in the levying of additional taxes, but merely constitute advances which are deductible at the time of settlement of the definitive tax liability. Therefore, imported products are not being subject to internal taxes in excess of domestic products and no breach whatsoever of the obligation contained in Article III GATT 1994 can be established.

2. Scope and applicability of Article III:2 of the GATT 1994

8.3 Argentina states that a distinction should be drawn between tax-related economic policy measures and those that are typical tax administration tools.
 

8.4 The creation and structure of taxes fall into the first category – that of tax-related economic policy – whereas measures to achieve efficient tax administration, minimizing tax collection costs, reducing tax evasion, covering the informal sector and promoting horizontal tax equity are a natural part of tax administration policy.

8.5 The first sentence of Article III:2 concerns all tax-related economic policy decisions that could give rise to tax discrimination between imported and domestic products.

8.6 GATT/WTO precedents indicate that Article III:2 "does not impose an obligation on contracting parties to adopt a specific tax system or specific taxation methods". ¹⁸⁴

8.7 On that same aspect, "Under Article III:2, first sentence, WTO Members are free to choose any system of taxation they deem appropriate provided that they do not impose on foreign products taxes in excess of those imposed on like domestic products". ¹⁸⁵

8.8 In other words, it emerges from both, the text of the first sentence of that Article and from its context and the prevailing interpretation thereof, that it is intended exclusively to govern tax differentials ("internal taxes or other internal charges … "), which, as has been stated, are dictated by tax-related economic policy.

8.9 As regards the creation and structure of taxes, a discipline covered by Article III:2, the Argentine regulations in question have the following features:

(a) In the case of the IVA, Article 45 of that Argentine Law (Text harmonized in 1997 and amendments thereto) provides that there shall be no discriminatory treatment with regard to rates or exemptions based on the domestic or foreign origin of goods.

(b) In the case of the IG, the Gains Tax Law contains no similar regulation as it is a tax that is entirely unrelated to goods or products but instead targets the net income of the natural or legal persons subject to it.

8.10 The Argentine Republic believes that this Panel's terms of reference, which contain the misnomer "Additional IVA on imports" in one case or speak of "Advance on IG" in another, undoubtedly address measures to achieve efficient tax administration, in which connection WTO Members have reserved for themselves a certain margin of discretion.

8.11 The European Communities state that the policy objectives of a tax measure are not pertinent in assessing its consistency with Article III:2, first sentence. Those objectives may become relevant only at a subsequent stage, in order to determine whether a measure that is incompatible with Article III:2, first sentence, is nevertheless justified under Article XX of GATT.
 
8.12 This was confirmed by the Appellate Body in Japan – Liquor Taxes.¹⁸⁶ In assessing the consistency of a tax measure with Article III:2, first sentence, it is necessary to address only two issues, ie. first, whether the taxed imported and domestic products are "like"; and second, whether the taxes applied to the imported products are "in excess" of those applied to the like domestic products.

8.13 It is well-established that Article III:2, first sentence, calls for a comparison of tax burdens, and not merely of tax rates.¹⁸⁷ Thus, in assessing whether imported products are taxed «in excess of» domestic like products, it is necessary to consider not only the applicable rates, but also any other element of the tax which may have an impact on the fiscal burden imposed on the products, including the rules for the collection of the tax. Indeed, if the distinction drawn by Argentina between «substantive» tax measures and measures for the collection of the tax were upheld, it would become extremely easy for WTO Members to circumvent the requirements of Article III:2. ¹⁸⁸

(a) Applicability of Article III:2 of the GATT 1994 to advances on the IG

8.14 Argentina asserts that the IG is not a tax on products but one assessed on the income of natural or legal persons, whether importers or local market operators (as it can be inferred from the IG Law ¹⁸⁹), and is therefore not covered by the disciplines of Article, III:2 which deal with taxes or other charges on products.

8.15 In consequence, neither does Article III:2 cover IG payments on account effected at the time of importation or when transactions take place on the domestic market.

8.16 Article 1 of General Resolution (DGI) No. 3543 states: "There is hereby established a collection regime for the income tax, which shall be applied to transactions involving the final import of goods".

8.17 It can be seen that the levy instituted by the above resolution represents, beyond all doubt, an advance payment on the gains tax, and it bears repeating that this tax does not apply to specific products but to certain gains. In other words, we must distinguish between the IG to which natural and legal persons are liable, and the method of collecting that tax, involving the obligation to pay an advance when goods are imported. Depending on the circumstances of the case, that advance subsequently receives the treatment outlined in reply No. 45(e).

8.18 In this regard the EC itself stated in paragraph 59 of its first written submission that "the IG is an annual tax on income, which applies to both natural and juridical persons", and is regulated by the IG Law, Decree 1344/98 and by the Resolutions issued by the AFIP-DGI.

8.19 Similarly, in paragraph 60 of its first written submission, the EC admitted that "the IG is levied on all sources of income, including the profits derived from the sale of merchandise and other moveable property, both domestic and imported".¹⁹⁰

8.20 On this basis and in accordance with the general legal principle whereby the principal issue rules the subsidiary one, it is our view that if a tax – in this case the IG – is not covered by Article III:2, then neither is the advance payment thereof (IG advances).

8.21 Argentina therefore refutes the notion that the IG advance is a tax separate from the IG because if the IG did not exist, it would not be possible to collect advances against it.

8.22 This is consistent with the general criteria supporting advance payments, which are regimes for withholding or levy collection at source, being precautionary tools based on presumed tax-bearing capacity. This presumption is a crucial element in applying a precautionary tool, since tax evasion inevitably occurs in a process comprised of all the stages in the production and marketing chain.

8.23 The fact is that no one imports or trades on the domestic market without hoping to make a gain. If at the end of the period that gain does not materialize, in both cases (imports and domestic market) the excess payment is refunded with interests.

8.24 It may be concluded from the foregoing that IG payments on account are in no way related to products but affect the income ultimately accruing to an operator who trades in products".

8.25 The European Communities concurs with Argentina that the IG is not a tax applied to products. However, the measure in dispute is not the IG, but rather the charge¹⁹¹ in the form of an additional financial cost imposed on importers by the payment on account on imports provided for in Resolution No 3543. Those costs cannot be credited against the taxpayer's final IG liability and, therefore, are taxes or charges "applied to products". Indeed, the Argentinean tax authorities do not pay any interest to the taxpayer on the amounts that he has pre-paid. Interest is paid only on the amounts pre-paid in excess of the final IG liability determined at the end of the one-year tax period and only from the moment that those amounts are claimed.

8.26 Income taxes are not excluded per se from the scope of application of Article III:2. Ordinary income taxes fall outside the scope of Article III:2 because they apply to all income, irrespective of the source, rather than to income derived from the sale of goods only. For that reason, it is assumed that they are not passed on into the prices of the products. That assumption, however, is not justified in the case of the «advance» IG, which is collected whenever a product is imported. Moreover, the financial costs imposed by the «advance» IG cannot be credited against the Impuesto a las Ganancias.

8.27 The European Communities argues that Argentina, in its first submission had attempted to justify the application of a higher rate on imports on the grounds that it was necessary to compensate for the retenciones on account of the IG previously collected on domestic products¹⁹². That argument involves an admission on the part of Argentina that the costs imposed by the «advance» IG are passed on into the price of the products and, therefore, that it is a tax on products covered by Article III:2.

8.28 Argentina rejects the conclusion drawn by the EC, saying that what it stated was that the IG advance is based on the income that it is presumed will accrue to the importer when the goods are marketed, as well as on the apparent tax-bearing capacity in the cases of taxpayers importing articles for their personal use or consumption. In that context, Argentina refutes that the alleged cost arising from the IG advance is passed on to the price of product.

8.29 The European Communities argues that the "taxable event" giving rise to the imposition of that percepción, and consequently to the financial cost generated by that percepción, is not the accrual of a profit. The obligation imposed upon the customs authorities to collect the percepción arises whenever a product is imported, whether or not the import transaction concerned generates any profit. Furthermore, the amount of the percepción is computed on the basis of the customs value of the imported goods, and not of the profit margin obtained with the import transaction.

8.30 The mere fact that a tax on products may be credited against another tax is not sufficient to exclude that tax on products from the scope of Article III:2. That interpretation would be open to circumvention and lead to absurd results. Thus, for example, by applying the same logic, it could be argued that the VAT on the sale of products is not a tax on products where, as it is generally the case, it can be credited against the VAT on the provision of services.

8.31 The European Communities further argues that the profits generated by an import transaction do not accrue to the importer, but to the foreign exporter. Yet, as confirmed by the explanations provided by Argentina in response to Question 52, foreign exporters are not subject to the Impuesto a las Ganancias. Furthermore, the subsequent resale of the imported goods by the importer is already subject to a retención pursuant to Resolución 2784 on account of the profits earned by the importer on that resale. Thus, Argentina cannot claim that the «advance» IG purports to tax the importer's profits.

8.32 The European Communities contends that in any event, the tax measure in dispute is not the percepción as such, but rather the financial cost imposed by the percepción. That charge cannot be credited by the taxpayer against the IG. For the EC, it is indisputable that it constitutes a tax on products and not on income.
 
(b) Coverage of the advance systems by Article III:2 of the GATT 1994

8.33 Argentina asserts that in the case "Japan – Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages" of 1987, the Panel noted that the first sentence of Article III:2 prohibited the direct or indirect imposition of:

"internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products."

8.34 The Panel noted that the interpretation of this prohibition of discriminatory taxes was a strict one.

8.35 It was also strictly applied in GATT practices, for example, prohibiting even a very small tax differential (amounting to US$ 0.0002 per litre of imported petroleum) and ruling out a de minimis standard based on an alleged minimum trade effect (see L/6175, paragraphs 5.1.2 to 5.1.9). The Panel then found that the words "direct or indirect" and "internal taxes … of any kind" meant that in order to decide whether there was tax discrimination, not only was it necessary to consider the applicable tax rates but also the methods of taxation (e.g. different classes of internal taxes, direct taxation of finished products or indirect taxation through taxes on the raw material used in the product at the different stages of its production) and the rules on tax collection (e.g. tax bases).

8.36 Argentina states that the interpretation of Article III:2 must be limited to tax systems, rates and bases of determination. This is the case since the only way to achieve discrimination is by the setting of tax rate differentials or by applying the same tax rate on different tax bases, which would ultimately amount to a different tax depending on whether the tax base is higher or lower in the various cases.

8.37 The payments on account systems for the IG and IVA that are being questioned in this case are not part of the method of taxation, but are tax administration and collection measures that in no way alter the main tax liability, that is, that which arises from the tax law. WTO Members have reserved for themselves a certain margin of discretion as concerns measures to achieve efficient tax administration. Therefore, the payments on account instituted under these tax systems do not fall within the ambit of Article III:2.

8.38 Argentina considers that the payments on account are not a method of taxation and that they are tax administration measures that do not alter the main tax liability, it can hardly be considered that their rate differentials are akin to the concept of "internal taxes" or "other charges" of any kind.

8.39 In addition, given that the payments on account are not taxes in themselves and in the light of the applicable rate differentials, adequate mechanisms have been put in place to avoid any such impact (for example, refund of credit balances and exemption mechanisms). The Tax Court of the Nation stated in that connection:

" … it is obviously in keeping with the laws that those balances may be set off, refunded or transferred, as those mechanisms make it possible to avoid imposing on taxpayers in certain circumstances a burden heavier than that provided for under the tax law itself." ¹⁹³

8.40 Argentina argues that Article III does not prescribe a certain tax system which Members have to apply.

8.41 While the European Communities agrees that Article III does not prescribe a certain tax system and does not challenge the Argentinean IVA and IG laws per se, it argues that the payment on account systems are covered by Article III.
 
8.42 The European Communities argues that if the distinction drawn by Argentina between substantive" tax measures and " measures of tax administration" were upheld, it would become extremely easy for WTO Members to circumvent the requirements of Article III:2.¹⁹⁴
 
8.43 The European Communities professes that Argentina's extremely narrow interpretation of the scope of Article III:2 finds no support in the wording of that provision. To the contrary, the wording "directly or indirectly" and "internal taxes or charges of any kind" clearly indicate that it was the drafters' intention to capture all possible forms of tax discrimination.

(c) Coverage of "lost interest" by Article III:2 of the GATT 1994

8.44 The European Communities states that Article III:2, first sentence, calls for a comparison of tax burdens, and not merely of tax rates. In assessing whether imported products are taxed "in excess of" domestic like products, it is necessary to consider not only the applicable rates, but also any other element of the tax which may have an impact on the fiscal burden imposed on the products, including the rules for the collection of the tax. As noted by the panel in Japan – Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, ¹⁹⁵

"[…] the wording ‘directly or indirectly' and ‘internal taxes … of any kind' implie[s] that, in assessing whether there is tax discrimination, account is to be taken not only of the rate of the applicable internal tax but also of the taxation methods […] and of the rules for the tax collection […]."

8.45 The Panel mentioned as an example of the latter the application of "different basis of assessment." That example, however, is by no means the only one. The mechanisms for the pre payment of taxes, such as the percecpiones or retenciones, constitute another obvious example of "rules for the tax collection" which may give rise to discrimination prohibited by Article III:2, first sentence.

8.46 The cost for a taxpayer of pre-paying part of the tax is not the same as the cost of paying the tax in full at the end of the relevant tax period, even if the nominal amount to be paid is the same in both cases. If the taxpayer were not required to pre-pay part of the tax, he would have the opportunity to earn profits on that amount until the end of the relevant fiscal period. The loss of that revenue represents an additional cost for the taxpayer, which must be taken into account for the purposes of Article III :2. ¹⁹⁶

8.47 The tax authorities can compensate that loss by paying interest on the amounts pre-paid. The Argentinean authorities, however, do not do so. As a result, by requiring the pre payment of part of the IVA and the IG, they impose an additional cost on the taxpayers. To the extent that the percepciones are collected at a higher rate on imports than on internal sales, that additional cost is heavier on imported goods than on like domestic goods, in violation of Article III:2, first sentence.

8.48 The European Communities maintains that the "additional" IVA imposes a financial cost from the importation, when the "additional" IVA is collected, until the moment where the imported goods are resold internally and the "additional" IVA may be offset against the ordinary IVA collected by the importer on that resale. In the case of the "advance" IG, the importer bears a financial cost from the importation, when the "advance" IG is collected, until the liquidation of the Impuesto a las Ganancias at the end of the one-year tax period.

8.49 The European Communities argues that this lost interest is covered by Article III:2. The European Communities draws an analogy to the Panel report on EEC – Minimum Import Prices.¹⁹⁷ which it argues stands for the proposition that " lost interest " constitutes a "charge" for the purposes of Article II.1 b) GATT. By the same token, "lost interest" must be considered as a "charge" also for the purposes of Article III:2.

8.50 Argentina contests that the reference in Article III:2 to "internal taxes or other internal charges" is related to the alleged "lost interest" argued by the European Communities. Argentina questions the relevance of the European Communities' analogy from the 1978 case "EEC – Minimum Import Prices for Certain Processed Fruits and Vegetables and states that this case was analysing the application of Article II:1(b) of the General Agreement and not of Article III:2. In other words, the above-cited case deals with bound import duties (Schedule of Concessions in Article II of the General Agreement), while the present case pertains to national treatment as concerns domestic taxes (Article III of that Agreement).

8.51 Argentina recalls that subsequent to the findings of the Panel in 1978, Members adopted the Understanding on the Interpretation of Article II:1(b) of the General Agreement on Tariffs and Trade 1994 as part of the Agreements reached during the 1994 Uruguay Round. That Understanding clarifies the scope of the terms "other duties or charges" applicable to imports by prescribing that such measures must be recorded in the Schedules of Concessions, where it can be seen that they represent duties or other charges to be collected by the State on imports. It states in this regard:

"In order to ensure transparency of the legal rights and obligations deriving from paragraph 1(b) of Article II, the nature and level of any "other duties or charges" levied on bound tariff items, as referred to in that provision, shall be recorded in the Schedules of Concessions and annexed to GATT 1994 against the tariff item to which they apply. (…)."

 

Notes

¹²⁶  Ley del Impuesto al Valor Agregado No 23349 (B.O. of 15.4.97) (Exhibit EC – II.1), as last amended by Law No 25239 of 31 December 1999 (Exhibit EC –II.3).
¹²⁷  Decreto del Poder Ejecutivo 692/98 (B.O. of 17.6.1998).
¹²⁸  Articles 1 a) and 4 a) and b) of the IVA Law.
¹²⁹  Ibid., Articles 1 c). See also Article 2 of the IVA Regulation.
¹³⁰  Article 27 of the IVA Law.
¹³¹  Ibid., Articles 37, 39 and 41.
¹³²  Ibid., Article 27.
¹³³  Ibid., Article 12.
¹³⁴  Ibid., Article 28.
¹³⁵ Ibid., Article 29.
¹³⁶  Where a registered taxpayer makes a sale to a non-registered one, it must charge, besides the IVA due on that sale, an additional amount determined by assessing the applicable IVA rate on 50 percent of the net sales price (cf. Articles 4, 30 and 38 of the IVA Law). That additional amount is assumed to represent the IVA due on the subsequent re-sale of the goods by the non-registered taxpayer.
¹³⁷  Article 27 of the IVA Law. See also Decree 2394 (B. O. of 11 November 1991), which empowers the Administración Nacional de Aduanas to act as an agent for the "collection" of the IVA, Exhibit EC II.4.
¹³⁸  Resolución General No 3431 of 19 November 1991 (hereinafter, "RG 3431"), Exhibit EC – II.5.
¹³⁹  Resolución General No 3337 of 7 March 1991 (hereinafter, "RG 3337"), Exhibit EC – II.6.
¹⁴⁰  RG 3431, Article 4.
¹⁴¹  RG 3431, Article 3.
¹⁴² RG 3431, Article 3.
¹⁴³  RG 3431, Article 2.
¹⁴⁴  See also Article 26 of the IVA Law.
¹⁴⁵  See also Article 8 a) of the IVA Law.
¹⁴⁶  In accordance with Article 33 of the IVA Law, bienes de uso are those with a useful life of more than two years for the purposes of the Impuesto a las Ganancias.
¹⁴⁷  RG 3337, Article 1.
¹⁴⁸  Ibid., Article 9.
¹⁴⁹ Ibid., Article 2.
¹⁵⁰  Ibid.
¹⁵¹ Ibid., Article 1.
¹⁵² Article 2 of Resolución General No 18 of 23 September 1997 (hereinafter "RG 18"), Exhibit EC II.7. RG 18 has replaced Resolución General No 3125 cited in Article 1 of RG 3337.
¹⁵³ Ibid.; The European Communities states that these are, generally speaking, large companies.
¹⁵⁴ Ibid.
¹⁵⁵ Article 1 of RG 3337.
¹⁵⁶ Ibid., Article 3. b).
¹⁵⁷ Ibid., Article 3. c).
¹⁵⁸ Ibid., Article 5.
¹⁵⁹ Ley de Impuesto a las Ganancias, as codified by Decree No 649/97 (B. O. 6.8.97),Exhibit EC II-2, as last amended by Law No 25239 of 31 December 1999, Exhibit EC II-3.
¹⁶⁰ Decreto Reglamentario 1344/98 (B. O. 25.11.1998).
¹⁶¹ Articles 1 and 2 of the IG Law.
¹⁶² Ibid., Articles 2; 49; 52 a) b) c) d) and e); 58; and 65.
¹⁶³ Ibid., Article 69.
¹⁶⁴ Ibid., Article 90.
¹⁶⁵ Resolución General No 3543, of 7 July 1992 (hereinafter, "RG 3543"), Exhibit EC II-8.
¹⁶⁶ The Decreto Presidencial 1,076/92 (B. O. of 2 July 1992) authorizes the Agencia Nacional de Aduanas to act as an agent for the collection of the IG, Exhibit EC II-9.
¹⁶⁷ RG 3543, Article 8.
¹⁶⁸  Article 2 of RG 3543.
¹⁶⁹ Ibid.
¹⁷⁰  Ibid., Article 4.
¹⁷¹  Ibid.
¹⁷²  Resolución General No 2784 of 25 January 1988 (hereinafter, "RG 2,784"), Exhibit EC II-10.
¹⁷³  Article 1 of RG 2784.
¹⁷⁴  Article 52 a) of the IG Law.
¹⁷⁵  Ibid., Article 52 b).
¹⁷⁶  Ibid., Article 52 c).
¹⁷⁷  Ibid., Article 52 d).
¹⁷⁸  Ibid., Article 52 e).
¹⁷⁹  Ibid., Article 58.
¹⁸⁰  Article 15.3 of RG 2784.
¹⁸¹  Ibid., Article 16.
¹⁸²  Ibid., Article 3 f).
¹⁸³  Ibid., Article 14. 3.
¹⁸⁴  Japan – Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, BISD 34/S/83, paragraph 5.13, page 123.
¹⁸⁵  Japan – Alcoholic Beverages, WT/DS/8, paragraph 6.24, page 148.
¹⁸⁶  Appellate Body Report in Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996 (Japan – Liquor Taxes), at pp. 18-19. See also the Appellate Body Report in Canada – Certain measures concerning Periodicals, WT/DS 31/AB/R, adopted 30 July 1997, at p. 21.
¹⁸⁷  Panel Report on Japan – Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, BISD 34S/83, at para. 5.8. See also the Panel report on US – Measures affecting the Importation, Internal Sale and Use of Tobacco, DS44/R, adopted 4 October 1994, at para. 98.
¹⁸⁸  Although it concerns GATT Article III:4, the following passage of the Panel report on United States – Section 337 of the Tariff Act of 1930 (adopted 7 November 1989, BISD 36S/345, at para. 5.10) is also pertinent here:

"In the Panel's view, enforcement procedures cannot be separated from the substantive provision they serve to enforce. If the procedural provisions of internal law were not covered by Article III:4, contracting parties could escape the national treatment standard by enforcing substantive law, itself meeting the national treatment standard, through procedures less favourable to imported products than to like products of national origin."

¹⁸⁹  Article 1: "All gains (ganancias) earned by natural or legal persons are subject to the emergency levy established by this Law. The persons referred to in the preceding paragraph who are resident in the country shall pay tax on all their gains earned in the country or abroad, and may credit against the tax governed by this Law the sums actually paid under analogous levies on their activities abroad, up to an amount not exceeding the increased tax obligation resulting from inclusion of the gains earned abroad. Non-residents shall pay tax only on their gains from Argentine sources, in accordance with the provisions of Title V. Undivided estates are taxpayers on accordance with the provisions of Article 33."
¹⁹⁰  This was confirm by the EC in its answer 39 to the question of the panel dated 10/May/00. "The tax measure in dispute is not the Impuesto a las Ganancias, which the EC agrees is not a tax applied to products. Rather, tax measure at issue is the harge in the form of an additional financial cost imposed by the percepcion on imports provided for in Resolución N° 3543"

¹⁹¹  The EC recalls that Article III:2 applies to "internal taxes or other internal charges of any kind". In EEC - Programme of Minimum Import Prices, Licences and Surety Deposits for Certain Processed Fruits and Vegetables" (BISD 25S/68, adopted on 18 October 1978, at para. 4.15), the Panel concluded that the "lost interest" associated with the provision of an import deposit was a "duty or charge of any kind imposed on or in connection with importation" in the sense of GATT Article II:1(b). By the same token, the financial costs imposed by percepciones and retenciones are "internal taxes or other internal charges of any kind" within the meaning of Article III:2.
¹⁹²  See paragraphs 166-167 of Argentina's first Submission.
¹⁹³  Ruling of the Tax Court of the Nation, Chamber "A," Case File No. 14.250 – I of 18 April 2000, "Cía. Industrial y Comerical Sanjuanina S.A.."
¹⁹⁴ Although it concerns GATT Article III:4, the following passage of the Panel report on United States – Section 337 of the Tariff Act of 1930 (adopted 7 November 1989, BISD 36S/345, at paragraph 5.10) is also pertinent here: "In the Panel's view, enforcement procedures cannot be separated from the substantive provision they serve to enforce. If the procedural provisions of internal law were not covered by Article III:4, contracting parties could escape the national treatment standard by enforcing substantive law, itself meeting the national treatment standard, through procedures less favourable to imported products than to like products of national origin."; Cf. the Report by the Appellate Body in Canada – Certain measures Affecting the Automotive Industry, WT/DS139/AB/R, WT/DS142/AB/R, at paragraph 142.
¹⁹⁵  Panel Report on Japan – Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, BISD 34S/83, at paragraph 5.8. See also the Panel report on US – Measures affecting the Importation, Internal Sale and Use of Tobacco, DS44/R, adopted 4 October 1994, at paragraph 98.
¹⁹⁶  See footnote 191.
¹⁹⁷  Ibid.