Bajo_cero2 said:
I agree partially.
The State needs the dollars to pay for imports but we have a distorted economy because people treasure the dollars and there is a distorted lack of them in the central bank.
But people buy dollars and keep them under the matress or they used to buy real state, the best 2 ways to evade paying taxs.
Now, people has pesos and they must invest them otherwise they loose money because of inflation. The main problem of this country is that, intead of investing in opening a factory for producing goods that creates work for people, taxs for the State and income for the country when they are exported, people plays the bicicleta financiera, they gamble with money buying or selling dollars and that s how the economy got destroyed so many times.
The other big issue here is that people doesn t pay taxes and that s why they need to print money, if people starts paying taxes, the economy works better, this is basic.
What the President is doing is smart and she has big balls because if she is success, the cyclical economic crisis are over.
Of course, we don t have to agree, just to respect our different point of view.
Regars
Bajo_Cero is right about a lot of what he says here. The real estate market is one of the biggest sources of tax evasion in the economy. I'm not just talking about illegal tax evasion, however. I am also talking about legal tax evasion. I am of the view that this is done by design for the benefit of these same political leaders. Many Argentines have told me this as well. The ruling class of this country has created themselves loopholes where they can continue to evade taxes.
Let's take a look:
1. Individuals have no capital gains tax (a tax on the increase in the value of property). I can buy a house today for $100,000 USD and sell it tomorrow for $200,000 USD and I pay no tax on that gain. In most developed countries this benefit is only given for the family home. Here in Argentina you have this benefit on all real estate, including raw land.
2. There is no VAT tax on residential real estate rentals. I can buy as many properties as I want, I can rent them to you and there is no VAT on the rent. The fact that property owners don't have to pay VAT when they rent their apartments means that they evade every single other expense on their residential real estate (i.e. workmen, materials, etc) because they have no use for VAT credit. Usually they collect rent in cash and don't pay income tax on the rental either.
3. Purchases are made in cash. Just the fact that you have to go hand cash over the table for a real estate purchase is insane. This leaves much room for evasion because I can pay $125,000 for a property, but in the escritura I just put whatever I want... $100,000 for example. By doing this I not only avoid paying the full tax on the transfer of the property, but I also get to "blanquear" my money. I spend $25,000 in undeclared money and when I go to sell that property later, those funds will be transformed into declared funds. If I had to pay capital gains tax on the increase in value of the property, no one would want to declare a lower value because it would mean more taxes when they went to sell. However, since property transactions are done in cash, there is no way to control how much was actually paid.
The problem with the Ks is that they don't want to eliminate the evasion because that's the principal source of wealth for them and the rest of the ruling clan. They all got sweetheart patagonian land deals and made millions 100% tax free on the gains they got from buying their land cheap and selling for millions.
Instead, the solution is to introduce things like the COTI which tries to control that the final price in the escritura is similar to the price in the advertisement. But this doesn't help at all. If they really wanted to end tax evasion on real estate there would be a capital gains tax. Once you do that, everyone would declare the real value of the property because in the future they wouldn't want to pay extra income tax. They could also put VAT tax on residential rentals and then refund the 21% VAT to low-income renters. It would be a subsidy. But again, they would never do this because all the political class has real estate and they evade taxes with it.
