atin American taxes are static or on the rise, L reflecting the region's current economic difficulties and these countries' needs, in some cases to cut back on current-account deficits. Whether the rising taxes will indeed harm new investment is subject to debate, because most investment decisions are tax-neutral. However, it is only logical that higher taxes will chase money away to more tax-favorable parts of the world. Regardless, old irritants remain in the current environment, some former worrisome taxes are being resurrected, and some new and difficult-to-predict taxes have been presented.
The sampling of countries and taxes below reflects this trend, although some countries are still relatively placid.
The "SA" Problem
Concerning old irritants, a major problem in investment is created by the insistence in these countries on the use of SA's,l which have to be treated as corporations in the United States for tax purposes. Said Jay Silverman, senior tax attorney for CMS Energy, of Jackson, Michigan, "You can't 'check the box' on them and make them partnerships."
This is primarily a problem in privatizations of already-existing utilities, as opposed to green-field projects where a company is doing something on its own. It may not even be a factor in terms of oil and gas exploration projects or LDCs, which are not normally privatizations.
Silverman said: "The result is that's not as favorable from a US. tax point of view. It's much more desirable to have an entity that you can treat
Robert E. Willett, associate publisher of Natural Gas, is president of the Financial Communications Company of Houston. He makes a specialty of editing and publishing on energy and Latin American business.
as a partnership for U.S. tax purposes, like a 'limitada."'3