Taxing Large Fortunes in Argentina: Who Will be Affected?

The bill promoted by the ruling coalition of Frente de Todos to collect an extraordinary tax on large fortunes has advanced. It outlines that the tax base will be assets of 200 million Argentine pesos. It sets staggered, increased payments which respond to the growth of the fortunes that are affected by this tax.

The solidarity contribution from those with greater contributory capacity in the country, will be for a sole time and an exception. According to the government’s database, some 12,000 people will have to contribute in an extraordinary way. This will allow the government to raise up to 2.8 billion USD, according to a report prepared by the consultancy firm Economic Project based on declarations of personal property.

The funds raised will have three destinations: assist workers in small and medium-scale enterprises who have been most impacted by this pandemic, support people in vulnerable neighborhoods, and purchase medical and healthcare supplies for COVID-19.

The data from the Federal Administration of Public Revenue (AFIP) indicates that of the total wealth declared by residents, 40% is outside Argentina. Among those with property abroad, 5.5% accounted for 60.4% of the declared external assets. While, among declarations of goods in the country, 0.6% of the above section accounted for 10.7% of the wealth declared in Argentine territory.

Based on the data from the National Institute of Statistics and Census (INDEC), Argentines hold external assets of at least 400 billion USD, of which 103 billion USD were accrued between 2015 and 2019. The outflow of capital, understood as expatriation of domestic savings, decreases investment opportunities and exacerbates external restriction (currency scarcity), damaging the prospects for national development.

Those who have to pay this extraordinary contribution will be a small group, including those who pocketed currency away in capital flight during the past four years. As revealed by El Cohete a la Luna news network, the list of people who hold external assets, 63% of them are foreign and/or transnational companies.

The report by El Cohete a la Luna shows that the Clarín Group, the Techint Group, Arcor, Pampa Energía and Aceitera General Deheza are listed in a group that took 86 billion USD out of the country. The list also include executives of the Cervecería y Maltería Quilmes, Pan American Energy, Claro, YPF S.A., Barrick Exploraciones, Mirgor, Telefónica de Argentina, Siderar, Compañías Asociadas Petroleras S.A (CAPSA) and Capex, among others.

Argentina suffered one of the worst economic crises in recent history during the term of right-wing Mauricio Macri. During his time in office Argentina’s foreign debt ballooned and poverty rose to unprecedented levels. When he left office, 40% of the population was under the poverty line.

Since Alberto Fernández and the coalition Frente de Todos took office in December, they have made concerted policy efforts to alleviate the immediate social and economic impacts of the crisis on the most vulnerable sections. However the challenge of how to pay off Argentina’s debt with the International Monetary Fund remains a pressing concern.