Argentina’s ‘Netflix tax’ is fanning the flames of national politics

Entertainment makers, meet Argentinian politics.
Entertainment makers, meet Argentinian politics.
Image: (AP Photo/Natacha Pisarenko)
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In its latest protectionist move, the provincial government of Argentina’s capital, Buenos Aires, last week announced a 3% gross income tax (link in Spanish) on all foreign companies that run online subscription services. Although no companies were named in the new rule, local press have dubbed the measure “the Netflix tax”—and in the process fanned the flames of national politics.

According to Article 1 of the two-page resolution 593 (link in Spanish), written by the city’s revenue service, the tax, effective Nov. 1, would apply to all services that “access movies, TV and other audiovisual entertainment that are transmitted over the Internet to TV sets, computers and other devices connected to the Internet.” Netflix, Spotify, Amazon Instant Video, among others, are likely targets.

Critics denounced (link in Spanish) the move, fearing a hike in subscription fees. For its part, Spotify said its fees won’t (link in Spanish) change.

The conservative head of the province of Buenos Aires, traditionally Argentina’s most powerful political post after the presidency, is defending the move. Former businessman Mauricio Macri, who leads the right-wing Propuesta Republicana (Republican Proposal) party, has said (link in Spanish) that the ‘Netflix tax’ levels the playing field for local and foreign websites. Widely expected to run in next year’s presidential election, Macri has for years criticized Argentina’s president Cristina Kirchner for expanding the country’s welfare state at taxpayers’ expense.

Kirchner, a self-proclaimed Netflix fan (link in Spanish), says the tax is “unfair” and possibly politically motivated. That may be. Two lawmakers from Kirchner’s Frente para la Victoria (Front for Victory) party say the law (link in Spanish) is meant to favor the country’s largest media conglomerate, Grupo Clarín, which has clashed with Kirchner throughout her presidency. Grupo Clarín’s CEO Héctor Magnetto is Macri’s highest-profile supporter.

Whatever the motivation for the new law, Netflix, Amazon and others will have to reassess the profitability of operating in Argentina.