Argentina weighs taxing rich during pandemic

In a year of lengthy shutdowns and widespread financial fallout, both chambers of the National Congress have voted in favor of a one-time levy on the 11,865 Argentines whose individual assets add up to at least 200 million pesos (€2 million/$2.4 million) to help fund the fight against the novel coronavirus. Under the Aporte Solidario y Extraordinario (Extraordinary Solidarity Contribution), a graduated wealth tax would be imposed — starting at 2% on domestic assets from 200 million pesos to 299 million and maxing out at 3.5% on assets above 3 billion pesos, and ranging from 3% to 5.25% on assets abroad. The idea is to help small businesses and less-wealthy Argentines, who are experiencing the financial fallout from the pandemic disproportionately, as well as to purchase necessary medical supplies.

"Only 0.02% of the population will pay this contribution," Carlos Caserio, the president of the Senate's budget committee, said on December 4. "Don't be deceived: We are not persecuting the rich." He said the government simply sought a contribution from the richest Argentines so that the country could survive the pandemic and recover from the financial impact.

But Martin Lousteau, a senator from the opposition Radical Civic Union (UCR) sees the measure differently. "We live in a country with record tax rates," he said in the debate, "and yet we have record poverty." He wrote on Twitter: "Instead of creating new taxes, couldn't we learn how to manage better?" 

Cesar Litvin, an accountant and CEO of a financial advisory firm who teaches courses on taxes at universities, had a similar view. "I have no doubt the country needs more fiscal revenues to affront the damage by the coronavirus pandemic, but, on the other hand, I'm sure the wealth tax will have effects contrary to those intended," he wrote in an email. "Tax pressure in Argentina has reached unsustainable levels, and most of the population paying taxes is tired of being the only one to carry on their backs the weight of an obese state in relation to the increasingly high public expenditures."

Litvin was referring less to the maximum 35% percent on income tax (compared with a maximum of 45% in Germany) than to various "national, provincial and municipal taxes," as well as an existing tax on assets. 

'Health and economics'

Christian Ambrosius, a German development economist and visiting professor at the National Autonomous University of Mexico, said it wasn't really productive to point out the need to streamline public spending during an acute situation rather than discuss a one-time tax. He said the money was needed now.

Argentina was going through a profound financial crisis even before pandemic struck. The country has massive debt and narrowly escaped insolvency for a third time since 2001 in August. 

"The coronavirus landed in a country that has very difficult access to the international capital market and cannot afford more debt," Ambrosius said. In view of the limited options, he said, a levy on the megarich makes sense. 

"I think it has to be seen from the perspective of social fairness," Ambrosius said. "In Latin America, the crisis has hit the poorer populations much more because they are less able to protect themselves both in terms of health and economics." 

The 20 million Argentines who live under the poverty line make up 44.2% of the population, which, according to Clarin, the country's largest daily newspaper, is the highest proportion in 10 years. But, Litvin said, the just over 50% of Argentines who live above the poverty line might disagree with the proposal for the wealth tax. "Those who shoulder the tax burden and especially those who will be affected by the levy are completely against it," he said. He added that he believes the measure is unconstitutional and predicted that many would appeal it in the courts. Moreover, he said, the tax could lead to decreased investment, more unemployment and lower revenues from regular taxes. 

Ambrosius disagreed with that. "This is almost a standard reflex argument that always crops up when a progressive tax is tabled," he said. "But this is a levy on private assets — not on business activity." He said the fear that investment would suffer as a result of the tax was exaggerated.