Milei Wants Argentines to Dollarize the Economy for Him

[Ries]

There is a tax treaty with the USA. See my thread: USA Govt to disclose Argentinian US bank account holders
1 Oct 2024

La AFIP recibió datos de unas 145.000 cuentas de argentinos en EEUU: controles para el blanqueo y detalles del intercambio

Con esa información, el Gobierno reforzará los controles fiscales para mejorar la recaudación tributaria. Incluye datos de cuentas en el sistema financiero existentes en el período fiscal 2023

www.infobae.com

....During September, the AFIP received information on approximately 145,000 accounts in the name of Argentine tax residents. Most of them are individuals in the U.S. banking system. It has a cut-off date from Jan 1-Dec 31, 2023. This is because the IGA 1 model agreement was not retroactive to previous years. With this information, the Gov't will expand the search for contributors who may participate in the "blanqueo de capitales". The exchange of information is being carried out under the framework of the Foreign Account Tax Compliance Act (FATCA), an international agreement aimed at combating tax evasion through the detection of undeclared assets abroad. This agreement was activated by Sergio Massa when he was head of the Ministry of Economy....

this is not a tax treaty. Its a one time release of some information, in a law enforcement effort to track money laundering.
A tax treaty, such as Argentina has with over 2 dozen countries, and the US has with close to 50 countries, means that each country will acknowledge the taxes paid in the other, and not make people pay taxes in both. https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z

 

[FrankPintor]

The problem here is that lithium refining generates large amounts of incredibly nasty toxic waste as a by-product. It is a truly vile process. Argentina is already suffering enough of this "pollution by foreign investment" from the gold extraction operations by foreign controlled entities. This is not their country, and they don't give a shit. We, on the other hand, live here.

Apologies for nitpicking. I agree with the rest of what you say. But electric cars are a dead-end, and lithium refining is poison.

Estimado @Redpossum, I was unaware of the toxic waste from lithium salt refining. I’ll do my research of course, but if you can, please send links.

In any case, it’s going away, 10 years max to full lithium battery recycling.

 

[A Antares]

Its obvious that to actually fix the economy, the first step is tax reform.
The current government income from taxes actually collected (as opposed to nominal taxes that exist on the books but no one pays)
is extremely weird, and regressive.
currently the big majority of government income comes from three types of taxes-
1- IVA (currently double that of Japan, triple Canada, and higher than most of South America)
extremely regressive.
2- employment taxes on workers and employers
also very regressive
3- weird tax on the export of a very small basket of agricultural products

almost nobody in Argentina pays personal income tax- an estimated 80,000 or so people in total.
contrast that with the USA, where 43% of all government income is personal income taxes.
corporate taxes are also very low here as a percentage of GDP.
there are no property taxes to speak of here- certainly, if you compare the city of buenos aires, with, say NYC, which gets 44% of its total revenue from property taxes. Here, I dont evey qualify to pay the bienes for my apartment, based on the value, and my ABL tax is equivalent to what I pay in the USA for garbage collection, but it covers also street cleaning and street tree maintenance.


so- currently, the rich dont pay much, the lower 75% pay close to half of all the taxes, and while small businesses have many taxes on the books, total business tax income is very small compared to most similar sized economies.

There is no tax treaty with the USA, which is for one main reason- so rich argentines can shelter wealth tax free in the USA.

A more progressive and modern tax system could keep the total percentage of taxes per gdp at a similar level, but tax the people with money, not the poor. Currently Argentina is NOT a high tax nation- total tax burden is around 29%, about equal with the USA or Australia, well below most of europe, about in the middle of the pack globally.
Its who pays the taxes that makes the difference.

Secondly, we need a national industrial policy, which of course is hand in hand with tax reform. Rather than cutting all tariffs and all taxes, you target taxes, tariffs, and government support to create value added products and services which can earn dollars thru exports. Argentina is well situated to export, with a steel industry, auto factories, a decent sized industrial manufacturing base (ag equipment, appliances, tools, electrical equipment like transformers, food production equipment, clothing and shoe industries, and a lot more)
But the government instead thinks that lithium mines and opening exploration to multinational oil companies is the way to go.
Observe the success of South Korea, Vietnam, Taiwan, and even Mexico, in terms of factories and exports, vs the situation of places like Venezuela, or Nigeria, or even Russia, which put all their eggs in the basket of deals with big oil...

obviously, reform of import and export infrastructure, taxes, and beauracracy would be needed too, but targeted and strategic to support high income jobs here, and encourage exports.

none of this is rocket science- all these policies are in effect, successfully, in dozens of countries around the world.

You are correct in large part ríes. And that is the philosophical rub isn't it in all of the countries in which there is endemic corruption? Why be a chump and pay taxes when the politicians only steal them?

So, for example, an apartment owner dishonestly fails to report taxable rental income with the justification that the politicians and civil servants are dishonest. "Hey, everyone does it." It's a vicious downward ethical cycle of eroded trust. Parents here teach their kids how to evade taxes and the parents of corrupt civil servants teach their kids how the system works and how to get ahead by grifting.

Corruption to me is the root cause of the economic problems that Argentina faces, and which undermine any fiscal and monetary initiatives. The tacit acceptance of the pervasive corruption that, like rust, erodes the common weal. Argentines complain, but they are resigned to this reality.

The remedial economic suggestions here treat the symptoms but not the cause. Until there is faith that the playing field is level, Argentina will continue to have a dysfunctional economy. I wish Presidente Milei success in improving the lives of ordinary Argentines, but until the corruption is eradicated to some acceptable level, there is no short-term solution to this mess that has been decades in the making. Milei has good intentions yes, but does not yet realize that he is Sisyphus.

Pervasive corruption is the root of the problem. It is a part Argentina's national DNA. It won't change, so why complain about it? We deal with it or we move along.

 

[elhombresinnombre]

(toxic waste from lithium extraction)
In any case, it’s going away, 10 years max to full lithium battery recycling.

Ah.. ten years again. It's ten years from production scale carbon capture; from industrial scale green hydrogen manufacture - although there's a mandate to have that operational by 2030. And it's ten years from practical nuclear fusion and always has been. Forgive my cynicism and truly it will be great (sort of) if these things actually come to pass but in my philosophy the only sure-fire way of scaling back pollution damage is to make and use less stuff.

 

[Ries]

You are correct in large part ríes. And that is the philosophical rub isn't it in all of the countries in which there is endemic corruption? Why be a chump and pay taxes when the politicians only steal them?

So, for example, an apartment owner dishonestly fails to report taxable rental income with the justification that the politicians and civil servants are dishonest. "Hey, everyone does it." It's a vicious downward ethical cycle of eroded trust. Parents here teach their kids how to evade taxes and the parents of corrupt civil servants teach their kids how the system works and how to get ahead by grifting.

Corruption to me is the root cause of the economic problems that Argentina faces, and which undermine any fiscal and monetary initiatives. The tacit acceptance of the pervasive corruption that, like rust, erodes the common weal. Argentines complain, but they are resigned to this reality.

The remedial economic suggestions here treat the symptoms but not the cause. Until there is faith that the playing field is level, Argentina will continue to have a dysfunctional economy. I wish Presidente Milei success in improving the lives of ordinary Argentines, but until the corruption is eradicated to some acceptable level, there is no short-term solution to this mess that has been decades in the making. Milei has good intentions yes, but does not yet realize that he is Sisyphus.

Pervasive corruption is the root of the problem. It is a part Argentina's national DNA. It won't change, so why complain about it? We deal with it or we move along.

I disagree.
I have seen much worse "corruption" in other places-
I have friends in NYC who did construction who had to bribe many people to do pretty much anything, from building inspectors to traffic cops.
Had friends in Chicago who routinely bribed cops to not give tickets- one friend of mine even got change for a 20 once.
In LA, until very recently, you could pay cops to kill people for you.
ONE politician in the Ohio, who nobody had even heard of, got 20 years last year for $60 Million in kickbacks. (house speaker Larry Householder)
We wont even start with Trump...

by comparison to the USA, much less many african, asian, or middle eastern countries, Argentina is barely corrupt at all.
Putin alone is estimated to have skimmed $200 billion dollars.
The Malaysian prime minister skimmed $700 million.
Argentine politicians are small potatoes, especially compared to the GDP.

I have never had customs here ask for a gift, or steal anything, which I seen in some third world countries, and Italy once.
Never been asked for a bribe by anyone, including rural traffic cops.
Never had issues with banks or money transfers or utility bills, and, frankly, in 15 years and a variety of construction projects, I have found the only issue is lateness- never ripped off.
Taxi drivers round the fare down.
I have been in a lot of lines in a lot of government offices, and the average civil servant here has been pretty helpful to me, and never asked for "grease".

The problem I see is the oligarchy, which is basicly about 75% land grant families dating back to the Spanish invasion, still own and run everything, and are a fair percentage of the politicians who make sure the laws allow them to stay rich. They dont really need bribes and kickbacks- those are for Brazilian companies building the Sube- they already own everything, from the newspapers to the tv stations to the utilities to the phone companies to the factories.
well over 75% of ALL the arable land in Argentina is owned by under 1000 owners, and a bunch of those are shell companies for even fewer rich people.
And they make sure they can sheild their wealth- no inheritance taxes, no nationwide property taxes, and virtually none of them pay income taxes- thats for middle management.
Wealth doesnt have income- it earns interest and owns shares, and has waterfront homes in Miami and Punta and condos in NYC.

 

[A Antares]

I disagree.
I have seen much worse "corruption" in other places-
I have friends in NYC who did construction who had to bribe many people to do pretty much anything, from building inspectors to traffic cops.
Had friends in Chicago who routinely bribed cops to not give tickets- one friend of mine even got change for a 20 once.
In LA, until very recently, you could pay cops to kill people for you.
ONE politician in the Ohio, who nobody had even heard of, got 20 years last year for $60 Million in kickbacks. (house speaker Larry Householder)
We wont even start with Trump...

by comparison to the USA, much less many african, asian, or middle eastern countries, Argentina is barely corrupt at all.
Putin alone is estimated to have skimmed $200 billion dollars.
The Malaysian prime minister skimmed $700 million.
Argentine politicians are small potatoes, especially compared to the GDP.

I have never had customs here ask for a gift, or steal anything, which I seen in some third world countries, and Italy once.
Never been asked for a bribe by anyone, including rural traffic cops.
Never had issues with banks or money transfers or utility bills, and, frankly, in 15 years and a variety of construction projects, I have found the only issue is lateness- never ripped off.
Taxi drivers round the fare down.
I have been in a lot of lines in a lot of government offices, and the average civil servant here has been pretty helpful to me, and never asked for "grease".

The problem I see is the oligarchy, which is basicly about 75% land grant families dating back to the Spanish invasion, still own and run everything, and are a fair percentage of the politicians who make sure the laws allow them to stay rich. They dont really need bribes and kickbacks- those are for Brazilian companies building the Sube- they already own everything, from the newspapers to the tv stations to the utilities to the phone companies to the factories.
well over 75% of ALL the arable land in Argentina is owned by under 1000 owners, and a bunch of those are shell companies for even fewer rich people.
And they make sure they can sheild their wealth- no inheritance taxes, no nationwide property taxes, and virtually none of them pay income taxes- thats for middle management.
Wealth doesnt have income- it earns interest and owns shares, and has waterfront homes in Miami and Punta and condos in NYC.

You might want to get out more often.

Corruption Rank by Country

The Corruption Perceptions Index Rank (CPI Ranking) is published annually by Transparency International, a non-governmental organisation. A country or territory's rank indicates its position relative to the other countries and territories in the index.

tradingeconomics.com

 

[Ries]

You might want to get out more often.

Corruption Rank by Country

The Corruption Perceptions Index Rank (CPI Ranking) is published annually by Transparency International, a non-governmental organisation. A country or territory's rank indicates its position relative to the other countries and territories in the index.

tradingeconomics.com

Your link has zero info about how they arrive at this result. But here is a similar study, which shows, as I said, that Argentina is better than russia, most oasia, most of africa, and a broad swath of the middle east.

Also, the US ranking would seem to ignoepre what I call corruption- revolving doors between lobbying, industry and government, super pacs that dont have to release any info on donors, presidents receiving $70 million tax credits, corporations legally called “ citizens”, police who kill more people every year, jailing more than 2 mllion people, many solely due to poverty, and many other institutional factors that privilege the rich and exempt politicians from consequences.

Add up all the money christina is alleged to have taken, compare it to the nonstop reel of US politicians indicted yearly. People like menendez and cellular, but about 7 congressmen in the last 2 years, usually ten or so each presidential term. Mayors, city council members, judges, police, its non stop in the USA, and if you believe zero cops take bribes in the US, I have a bridge to sell you.

 

[elhombresinnombre]

The problem with a Corruption Perception Index is it is exactly that - perception. On the surface the UK looks very proper and law abiding and is nice and high on the index yet British Banks are used to launder billions of dollars and pounds each year and British overseas territories are used to do the same while keeping the players beyond the reach of the law.

In 2007 one British company was caught out and fined GBP255 Million by the US Department of Justice for pleading guilty to bribery valued at over GBP 6 Billion and that's just the tip of the iceberg.

 

[GMan_27]

Industrialisation and services are the only way to improve the economy.

The country exports a ridiculously high amount of unprocessed or low level processed agricultural products (over 55% of exports). Commodity dependence is seen as a symptom of underdevelopment, and in the case of Argentina leaves it at the whims of local climate to a great degree. It does not matter which government or leader is in control. One bumper or lower than normal harvest/crop and your economy is ruined.

Industrialisation for local consumption and export is key. Then developing a service based economy with actually progressive tax regimes to attract overseas companies is next. Funny thing though is that you can do that at the same time!

Removing barriers to entry in a country is key as well. Ease of business registration, ease of access to internet, electricity/energy/water, port and airport infrastructure and decent serviced land.

Regularising the economy is also a good step - The fact that a black market exists to get money into the country is banana republic levels of sad. Getting everyone paying using digital devices and cards to ensure proper monitoring for tax purposes is key. Make payments easier, make a simple tax system, make opening and running a business easy, then you will see the impact.

 

[A Antares]

Your link has zero info about how they arrive at this result. But here is a similar study, which shows, as I said, that Argentina is better than russia, most oasia, most of africa, and a broad swath of the middle east.

Also, the US ranking would seem to ignoepre what I call corruption- revolving doors between lobbying, industry and government, super pacs that dont have to release any info on donors, presidents receiving $70 million tax credits, corporations legally called “ citizens”, police who kill more people every year, jailing more than 2 mllion people, many solely due to poverty, and many other institutional factors that privilege the rich and exempt politicians from consequences.

Add up all the money christina is alleged to have taken, compare it to the nonstop reel of US politicians indicted yearly. People like menendez and cellular, but about 7 congressmen in the last 2 years, usually ten or so each presidential term. Mayors, city council members, judges, police, its non stop in the USA, and if you believe zero cops take bribes in the US, I have a bridge to sell you.

I was referring to corruption in Argentina; not "....russia, most oasia, [sic] most of africa, and a broad swath of the middle east". Nor was I referring to the United States.

If you are interested in the methodology of the Corruption Perceptions Index, you can read about it here: https://en.wikipedia.org/wiki/Corruption_Perceptions_Index#Methods The organizations which they query would seem, at first glance, to have more of an insight into Argentine corruption than your anecdotes.