steveinbsas said:
I am led to believe AFIP is not efficient at forcing tax payment so let's presume one does have the option to defer payment until sale or transfer at death.
Steve, it is true that the dollar has not kept pace with inflation in the last 10 years, but were you here in the mid-70s and late-80s? From June,1975 to March, 1976 the exchange rate went from 60 pesos per US$ to 400. I understand it was worse in the last year (1989) of Alfonsin's abbreviated term.
After the 2001 AR debt default, the peso was absurdly low compared to hard currencies. Things like food, transportation, entertainment, real estate, domestic products and clothes, etc were laughably cheap here in AR if one had a hard foreign currency. The peso was so worthless in 2001 that it took 7-8 years for it to achieve some sort of balance with other currencies so that prices resumed a semblance of near normal relativity.
Currently, politically driven fiscal policies are keeping the US$ artificially low. It has appreciated only 33% in the last 3 years while inflation has approached 100% over the same time frame. However, this kind of political manipulation of the exchange rate has limits and eventually exacts a cost. Right after the 2011 presidential election I think there will be a big jump in the exchange rate.
But let's say there is no repeat of hyperinflation like what occurred in the 70s and 80s and the exchange rate doesn't outpace inflation going forward. Let's say it just tracks inflation going forward and that in the next 3 years total inflation will be 100% (about 27% per year) like it has been in the past 3 years - so that the US $ trades at 8 in 2014. In that case it makes fiscal sense to defer payment if you can. An example.
To pay a $10 peso tax in 2008 when the rate of exchange was 3 to 1, one had to cash US$3.33. If the 2008 tax is $10, then in 6 years the total penalty will be about $22.50 (6 years x 38% x $10) plus the tax principle of $10 - a total balance of $32.50. To get $32.50 in 2014, I will need to exchange US$4. That is not much of a penalty for a 6 year deferment.
Factor in that after 7 years, the statute of limitations bars collection of the tax and that an event of hyperinflation over the course of ownership will make it likely that to pay the tax and accumulated penalty years hence one will need to exchange far less than US$4 or even $3.33.
I think it makes sense to opt for non-payment if that is an option. Do you disagree?
