New capital gains tax on property in Argentina

[sergio]

all well said.

the basic structure of paying taxes (and penalties for not paying) has to be functioning first. if this isn't in place then the govt and population will continue to just point fingers at each other with blame. once that exists (like in the US), then you will figure out real fast when money is disappearing into politicians' pockets.

my girlfriend's company offers her a benefit where they will pay for a monthly membership to either a gym, sport club, etc. she takes tennis lessons at two different courts here and went to the owners to ask if they could provide a receipt so she could receive the benefit from her company. one couldn't do it (they only work in cash), and the other could only give a B receipt (or something like that, don't recall exactly) because they didn't have a bank account to give the other type they initially asked for. what business doesn't have a bank account? that would be impossible in the USA.

Not really true. Every restaurant kitchen (there may be a few exceptions but not many!) employs undocumented (i.e. illegal) Mexicans or Central Americans. They are paid in cash (or in some cases employers knowingly accept their phony IDs and Social Security numbers, thus deducting taxes that the employee will never benefit from. The eleven million figure for illegals in the US is seriously understated. The number may be double that. These people are being paid "en negro" or "under the table". It's an outrageously corrupt system so in reality the US is not the amazing transparent society it pretends to be. And need I say that everyone knows about this corruption but nothing is done about it as it's convenient for employers.

 

[sergio]

This law is extremely unfair as clearly expressed in this excellent article . For example if you brought a property in January 2018 when the peso was 18 pesos per dollar for US$ 100,000 the deed price in pesos was 1,800,000 . Now if you sell it at the same price US$ 100,000 the deed price will be 3,650,000 pesos meaning that you have a tax liability of 15% of a gain that you did not earn . This law does not contemplate that real estate is in dollars and utilizes pesos as its model which is grossly unfair as this is a currency with huge fluctuations .

Read the article above for a clear definition of this punitive law[/QUOTE]

This is outrageously unfair. The 15 percent cap gains tax is bad enough but when designed this way it is nothing less than robbery. Is this how Macri thinks he'll attract investment? Who will bring money back nowadays knowing about the new tax laws.

 

[perry]

This law is extremely unfair as clearly expressed in this excellent article . For example if you brought a property in January 2018 when the peso was 18 pesos per dollar for US$ 100,000 the deed price in pesos was 1,800,000 . Now if you sell it at the same price US$ 100,000 the deed price will be 3,650,000 pesos meaning that you have a tax liability of 15% of a gain that you did not earn . This law does not contemplate that real estate is in dollars and utilizes pesos as its model which is grossly unfair as this is a currency with huge fluctuations .

Read the article above for a clear definition of this punitive law

This is outrageously unfair. The 15 percent cap gains tax is bad enough but when designed this way it is nothing less than robbery. Is this how Macri thinks he'll attract investment? Who will bring money back nowadays knowing about the new tax laws.[/QUOTE]

Macri has effectively destroyed the real estate market which is a huge driver of the economy by most estimates 20 percent. There seems to be no common sense with the policies of this government just restrictions and more taxes effectively strangling the economy.

 

[PoorSoul]

There seems to be no common sense with the policies of this government just restrictions and more taxes effectively strangling the economy.

Of course. That is how IMF run economies are meant to function. It strangles the country in order to pay back bond holders at any cost. When all the assets drop in price, then foreign investors sweep in and buy up all the country's assets. It is basic debt-trap.

If you are a current asset holder, then it sucks for you. But, if you are not, then way a couple years and buy up cheap assets. The effects of these policies will be "priced in" and likely will eventually be reversed.

 

[perry]

Of course. That is how IMF run economies are meant to function. It strangles the country in order to pay back bond holders at any cost. When all the assets drop in price, then foreign investors sweep in and buy up all the country's assets. It is basic debt-trap.

If you are a current asset holder, then it sucks for you. But, if you are not, then way a couple years and buy up cheap assets. The effects of these policies will be "priced in" and likely will eventually be reversed.

So basically you are saying that this is an engineered collapse that Macri in collusion with the imf destroys the economy as to buy up Argentina assets for pennies to the dollars?

 

[sts7049]

Not really true. Every restaurant kitchen (there may be a few exceptions but not many!) employs undocumented (i.e. illegal) Mexicans or Central Americans. They are paid in cash (or in some cases employers knowingly accept their phony IDs and Social Security numbers, thus deducting taxes that the employee will never benefit from. The eleven million figure for illegals in the US is seriously understated. The number may be double that. These people are being paid "en negro" or "under the table". It's an outrageously corrupt system so in reality the US is not the amazing transparent society it pretends to be. And need I say that everyone knows about this corruption but nothing is done about it as it's convenient for employers.

not sure what this has to do with the point i made.

yes, there are businesses in the US who hire illegal labor and pay them cash. that is a problem for sure although sorry, i disagree that "every kitchen save for a few exceptions" uses illegal labor, that's just biased exaggeration.

however, i would be willing to bet those businesses still operate legally on the surface. they have a bank account and pay taxes. that part of the system still functions normally even if the restaurant is using illegal labor.

 

[earlyretirement]

https://www.iprofesional.com/impuestos/280922-afip-dólares-ley-otros-El-Impuesto-a-las-Ganancias-sobre-la-venta-de-inmuebles-no-tiene-en-cuenta-el-efecto-dolar

This law is extremely unfair as clearly expressed in this excellent article . For example if you brought a property in January 2018 when the peso was 18 pesos per dollar for US$ 100,000 the deed price in pesos was 1,800,000 . Now if you sell it at the same price US$ 100,000 the deed price will be 3,650,000 pesos meaning that you have a tax liability of 15% of a gain that you did not earn . This law does not contemplate that real estate is in dollars and utilizes pesos as its model which is grossly unfair as this is a currency with huge fluctuations .

Read the article above for a clear definition of this punitive law

Yep. It would suck but the same thing happens in other countries with currencies that have depreciated. I have several friends that purchased real estate in Mexico and although the price they paid was in US dollars to the owner, they had a price in Mexican pesos on the deed as well. And when they purchased the exchange rate was only 11 pesos to $1 US and now it's almost 20 pesos to $1 US so they are in similar situations with the capital gains tax there.

Not a desirable situation.

 

[PoorSoul]

So basically you are saying that this is an engineered collapse that Macri in collusion with the imf destroys the economy as to buy up Argentina assets for pennies to the dollars?

I doubt Macri and IMF are even in collusion or that it is either of their conscious goals. It is simply just what happens when you hold a belief that debt providers MUST be paid back at any cost according to the debt schedule. The end result will create a policy that heavy in taxing and light on growth.

The reason is that restructuring the economy for long-term growth without strangling it is too long-term time horizon and is too unpredictable when your 1st priority is making all debt payments according to the debt schedule (which you have no control over and may not be optimal to your planning horizon).

So, it forces the adoption of a short-term view of draconian austerity and high taxes. This is the most sure and quickest way to achieve the #1 priority which is debt payments. Of course, this has domino effects in the economy, but the important thing is meeting the next debt payments and nothing else (for the IMF).

Naturally assets derive their value in part due to discounted cash-flows. Prospects of weak growth and high taxes will cause the decrease in asset prices. Increased regulation, such as anti-money laundering regulation which is another term for decreased freedom of money usage, will also have secondary effects as the utility some asset purchases provide decreases even beyond their cash flow reductions. Credit contraction will also effect asset demand, etc.

Only once the debt payments become secured can other goals be looked at such as long-term economic restructuring and sustainable economic growth. That will likely come several years from now or even a decade. You can look at greece who was pushed into the tax / austerity structure similarly and it has been a decade with lackluster results for their economy or asset prices. Who knows how deep down this hole argentina will go.

 

[Phatbuddha]

I doubt Macri and IMF are even in collusion or that it is either of their conscious goals. It is simply just what happens when you hold a belief that debt providers MUST be paid back at any cost according to the debt schedule. The end result will create a policy that heavy in taxing and light on growth.

The reason is that restructuring the economy for long-term growth without strangling it is too long-term time horizon and is too unpredictable when your 1st priority is making all debt payments according to the debt schedule (which you have no control over and may not be optimal to your planning horizon).

So, it forces the adoption of a short-term view of draconian austerity and high taxes. This is the most sure and quickest way to achieve the #1 priority which is debt payments. Of course, this has domino effects in the economy, but the important thing is meeting the next debt payments and nothing else (for the IMF).

Naturally assets derive their value in part due to discounted cash-flows. Prospects of weak growth and high taxes will cause the decrease in asset prices. Increased regulation, such as anti-money laundering regulation which is another term for decreased freedom of money usage, will also have secondary effects as the utility some asset purchases provide decreases even beyond their cash flow reductions. Credit contraction will also effect asset demand, etc.

Only once the debt payments become secured can other goals be looked at such as long-term economic restructuring and sustainable economic growth. That will likely come several years from now or even a decade. You can look at greece who was pushed into the tax / austerity structure similarly and it has been a decade with lackluster results for their economy or asset prices. Who knows how deep down this hole argentina will go.

But Argentina has WAY MORE asset than Greece - you cannot compare the two

 

[sergio]

not sure what this has to do with the point i made.

yes, there are businesses in the US who hire illegal labor and pay them cash. that is a problem for sure although sorry, i disagree that "every kitchen save for a few exceptions" uses illegal labor, that's just biased exaggeration.

however, i would be willing to bet those businesses still operate legally on the surface. they have a bank account and pay taxes. that part of the system still functions normally even if the restaurant is using illegal labor.

I don't know why you don't see my point. It was that the US is not as transparent as you suggest. Yes, restaurants that employ illegals (and there is a vast, vast number that do -- how many illegals are there? Some estimates are as high as 22 million. Even if only eleven million, the number is vast and restaurants are major employers. Also construction, gardening, housekeepers etc particularly in the border states). The exploitation of undocumented workers is a national scandal and the government looks the other way with few exceptions. The corruption even extends as far as employers knowingly accepting phony Social Security numbers so that they can collect taxes and pretend to be complying with the law. Yes, these employers pay taxes. They have bank accounts and they pay taxes but they also work with cash because they cannot give their undocumented kitchen staff anything other than cash unless their employees have submitted false Social Security numbers. Corruption is not limited to countries like Argentina. It exists in he US also, sometimes overtly as in the case of exploiting undocumented workers as well as in more sophisticated ways (what caused the financial meltdown of 2008? How many bankers went to jail?).