The bonds of the provinces as a means of payment of national taxes

In order to restrain their deficit, different provinces have issued bonds that work as “currency”, as they are used for paying any concept such as the payment of state workers’ salaries. These bonds are commercialized at a value that it is generally lower than the nominal value. Among these bonds the Federal Tax Authority only accepts that the “Patacones” issued by the Province of Buenos Aires, may be used to pay national taxes.

Two Federal Courts in different provinces accepted that the taxpayer may use the provincial “currency” bonds for the payment of national taxes in the same proportion in which they are received in their business, in spite of the lack of legal rules forseeing that situation. The arguments are that if they are not accepted that would mean (i) a discrimination in favor of the Province of Buenos Aires, whose bonds are accepted and (ii) a violation to the principle of equality under the law, as the taxpayers are forced to accept the bonds in their business.

These are judicial decisions related to injuction relief measures that will probably be challenged by the State before a Court of Appeal. Future judicial developments on this matter may define the use of these bonds and consequently considerably influence their exchange rate.