The Argentine province of Misiones is making unwelcome noise in the securitization market, as it seeks to expand the application of a stamp tax on trust agreements and securitization trusts regardless of where the documents are processed, according to Moody’s Investors Service.
“Most contracts for securitizations in Argentina are obliged to pay a stamp-tax in the City of Buenos Aires, where they are signed,” the agency said in a release. A government department in Misiones, however, is arguing that it should be able to collect this tax based on the fact that the general public residing anywhere in the country can purchase deals issued from these trusts, and therefore securitization has a “potential legal effect” in Misiones.
Moody’s expressed doubts that the courts would uphold this directive if it faced a legal challenge. The impact would, at any rate, be minor for the ABS market if the expanded scope of the tax only benefited Misiones. A bigger cause for concern is the potential that other provinces will want a piece as well, snowballing the cumulative stamp tax to a size that would cripple the industry.
The amount claimed by Misiones is the 1% stamp-tax rate multiplied by the province’s share of the Argentine population, which translates to 0.026% of issuance volume, Moody’s said.