Argentina Tax Amnesty Hits $20 Billion Goal Four Months Early

  • Final deadline to participate in amnesty is March 31
  • Country aims to jumpstart local investment amid recession

Argentines have declared $20 billion in hidden savings, hitting the government’s target more than four months before a partial tax amnesty comes to an end, Finance Minister Alfonso Prat-Gay said on Tuesday.

Argentines declaring funds can choose to either pay a 10 percent fine, or buy into government bonds and closed-end mutual funds to finance investment in the local economy. The fine will rise to 15 percent as of January, before the program expires on March 31. As of yesterday, $7 billion in cash was deposited in special bank accounts by people taking part in the program, Prat-Gay said.

President Mauricio Macri announced the partial amnesty for tax dodgers in May as he seeks to capture revenue from an estimated $400 billion in offshore assets held by Argentines. The amnesty aims not only to increase government revenue but also to stimulate local investment at a time when foreign commitments are lagging government expectations. The economy is forecast to shrink 1.5 percent this year.

“This of course widens the taxable income base and also puts to work savings that were until now flying under the radar,” Prat-Gay said at a conference.

JPMorgan has estimated the government could generate tax revenues of $8 billion to $10 billion through the program. HSBC has said it expects about $60 billion to be declared in total.

After two sovereign defaults in 15 years and the temporary freezing of bank accounts in 2001, many Argentines are still reticent of relying on local banks. Only 50 percent of Argentines owned a bank account in 2014, according to a World Bank report, compared with 68 percent in Brazil and 63 percent in Chile.

“It’s very probable that those who weren’t evaluating investment alternatives because of the tax implications will now have those funds at their disposal,” Prat-Gay said.

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