Week in Insights: Argentina’s Lithium Tax Gamble Is a Risky Move

Curated by Daniel Xu

Argentina has voted to eliminate its federal income tax for most taxpayers. Central to this decision is a burgeoning lithium industry and a plan to tax it. The country currently is the fastest-growing lithium producer and fourth-largest in the world.

Lithium is required for batteries in mobile phones, laptops, portable electronic devices, and electric vehicles. If Argentina can continue to increase production, it may be able to peg its revenue on a well-tailored lithium tax, at least in the short term.

Such a domestic production gamble has downsides. Worldwide lithium mining stood at 28,000 metric tons in 2010 and rose to 130,000 metric tons in 2022. While it’s certain to be in demand in the near future, the environmental hazards inherent in mining and disposing of spent material in the lithium industry have spurred innovation and research into alternative materials, including ordinary salt and magnesium.

Besides economic stability risks, lithium mining operations use lithium ponds that are organized in vast fields and take 100,000 gallons of water to produce one ton of lithium through evaporation. The result is unavoidable water, air, and ground pollution.

Argentina’s reliance on the lithium market to the exclusion of a federal income tax means the government will need to succeed at all costs, environmental or otherwise. The opposition party in the upcoming Oct. 22 election already has vowed to deregulate the industry—a position that may become bipartisan.

There are as many ways to generate tax revenue as there are countries to try them. At Bloomberg Tax, our experts not only watch domestic policies but also look abroad to see what works and what doesn’t.

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Aerial view of evaporation pools for salt mining in the Salinas Grandes salt flat in the northern province of Jujuy, Argentina, taken on Oct. 18, 2022.

Photographer: Martin Silva/AFP via Getty Images

Federal Insights

A recently adopted accounting standard update doesn’t go into effect until 2025, but private companies would do well to adapt ahead of time, say Venable’s Charles J. Morton and Jordan D. Jean.

Sam Kamyans and Roald Nashi of Kirkland & Ellis discuss how companies can enter into bankable revenue contracts for energy transition projects that have a 2050 net-zero emissions goal.

Global Insights

Marco De Leo and Francesco Parlatore of BonelliErede share key points for businesses outlined in the corporate tax guidance recently issued by the United Arab Emirates tax authority.

Jefferson VanderWolk of Squire Patton Boggs says Canada’s decision to break ranks with a global agreement by proposing a digital services tax on Jan. 1, 2024, is mystifying, as it risks damaging trade with the US.

Martin Back of Pinsent Masons explains a range of new legislative measures intended to improve Germany as a financial center and destination for investment.

David Weisner of Brown Brothers Harriman & Co. explains why a taxation agreement between the US and Taiwan making its way through Congress is catching the eye of investors with ties to both countries.

Columnist Corner

An IRS contractor was charged last month for stealing and leaking tax return data. In this week’s Technically Speaking, Andrew Leahey writes that the IRS needs to conduct a complete audit and revamp its security and staffing protocols to prevent further data leaks and breaches.

Save the Date

Since the US Supreme Court’s decision limiting affirmative action admissions in higher education, there’s been more pushback against diversity, equity, and inclusion programs—including lawsuits against firms over their policies.

Striking the right balance on DEI initiatives can be tricky. Learn how to steer clear of potential conflicts on Oct. 26 at noon ET by joining “How to Navigate the New Challenges of DEI Programs,” part of our free virtual Lunch & Learn series.

We have two experts on DEI efforts who will explain the current landscape and help you create stronger teams and better outcomes through diversity efforts.

Career Moves

Shivam Malhotra has joined Aprio as a partner leading the global mobility practice.

M. Elizabeth Walker has joined Barnes & Thornburg as a health care and public finance partner in Indianapolis.

Jenny Tran has joined Stradling Yocca Carlson & Rauth as a shareholder in the corporate and securities practice.

Isaac Lodico has joined the corporate and transactional practice group at Sherman & Howard in Denver.

If you’re changing jobs or being promoted, let us know. You can email your submission to TaxMoves@bloombergindustry.com for consideration.

News Roundup

It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team.
*Note: Your Bloomberg Tax login is required to access Tax News.

• Switzerland has increased the number of countries with which it’s sharing information on financial assets as part of the country’s international obligations to combat tax evasion.
• New York prepares to finalize rules for the “most extensive restructuring” of the state’s corporate tax framework since the 1940s.
• Microsoft Corp. became the latest tech giant to join a club of companies to do battle with the IRS over transfer pricing tax claims after the agency said the company owed the government $28.9 billion in unpaid taxes.
• PepsiCo Inc. hopes to claw back nearly $10.9 million in corporate income taxes paid to Illinois during an upcoming trial that will focus on whether the soft drink and snack food giant qualifies for an income exclusion generally reserved for foreign corporations.

A picture taken on Oct. 7, 2023 shows a view of the city of Lugano, southern Switzerland.

Photographer: Fabrice Coffrini/AFP via Getty Images

Tax Journals

Now that decentralized autonomous organizations have undergone significant capitalization and proliferation, it’s necessary to consider the entity-level tax implications arising from the ways in which DAOs carry on activities—and further develop the tax regime and guidance accordingly, says Rustin Diehl of Allegis Law.

*Note: Your Bloomberg Tax login is required to access Tax Journal articles.

Attention Law Students

Do you have an original take on the law—but you’re not a lawyer yet? Our student writing competition is the perfect opportunity to show off your work.

We invite students to choose an area of law and technology and describe how it might be tested in courts, update past practices, or force a rethinking of the legal landscape.

We’ll publish the winning entry in December, and the student with the winning entry will get a swag bag of Bloomberg Industry Group products.

Our Wish List

It’s the middle of the NFL season, and the NBA’s opening game isn’t far off. For October, we’re calling for article submissions on tax aspects of sports, gaming, and betting. We’d especially welcome analysis on gambling rules and athlete salaries.

If you have an interesting, never-published article for publication, you can contact our Insights team by email at TaxInsights@bloombergindustry.com.

Our Team

We talk about tax a lot. But there’s much more that you might hear us talking about if you popped into one of our Teams meetings. Here’s a quick look at what some of us are watching, reading, and listening to this week.

Watching
Katharine Butler (Acquisitions Manager): “Paradise,” a German science fiction film about a future where it’s possible to transfer years of your life to someone else for payment. I love a dystopian scenario!

Reading
Melanie Cohen (Content Editor): “Pageboy,” Elliot Page’s memoir.

Listening
Andrew Leahey (Columnist): I have been thoroughly enjoying Víkingur Ólafsson’s recording of J.S. Bach’s “Goldberg Variations.” Bach is one of the few composers whose works I’ve listened to enough to hear differences in interpretation. Ólafsson’s rendition is exquisite.

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