Argentina to Hit the Rich With Wealth Tax as Covid-19 Costs Rise
The legislation, which had already passed the lower house, was promoted by the governing coalition and spearheaded by lawmakers Carlos Heller and Maximo Kirchner, son of Vice President Cristina Fernandez de Kirchner. It seeks to plug a gap caused by a plunge in government revenue due to the strict lockdown authorities imposed to fight the pandemic -- with limited success.
“This is a unique, one-time contribution,” said Senator Carlos Caserio, a member of the committee responsible for the bill, according to a statement on the Senate’s website. “We’re coming out of this pandemic like countries come out of world wars, with thousands of dead and devastated economies.”
The law will target between 1% and 3% of a taxpayer’s wealth, Caserio said. It specifies a 50% surcharge for money stashed abroad. More than 500 Argentines took up tax residency abroad this year, almost half of them in Uruguay, which has been more effective in controlling the coronavirus pandemic. Non-resident deposits in Uruguayan banks have risen by at least $500 million since it became clear last year that the coalition led by President Alberto Fernandez would take power in Argentina.
Argentina ranked second-last of 53 countries in Bloomberg’s Covid Resilience Ranking of the best places to be during the pandemic. In a ranking of 120 countries with the biggest outbreaks, Argentina ranks 9th in Covid-19 deaths per capita, the second-worst outcome in Latin America after Peru. Its economy may contract as much as 11.6% this year, according to economists surveyed by Bloomberg.
In the past 21 years, Argentines have seen their incomes grow at a fifth of the pace of the rest of the world, according to opposition senator Martin Lousteau. “By the end of this year we will have the same income as in 1973,” he said, according to the Senate’s website.
In recent years, Argentina has swung from emerging-market renegade, to darling and back to villain again. In May, it defaulted on $65 billion of overseas borrowing racked up in a huge borrowing spree under the government of President Mauricio Macri. It’s now in talks with the International Monetary Fund about restructuring a further $44 billion of liabilities.
The gap between the official and market-based exchange rates has narrowed since October as the government has adopted more orthodox measures to boost exports. Inflation is still above 35%, and the central bank’s efforts to prop up the official rate this year have seen international reserves dwindle.