Argentines declare $90 billion in tax amnesty, recession lingers

Argentina said on Tuesday that $90 billion in assets had been declared so far under the government's tax amnesty plan, which outgoing Finance Minister Alfonso Prat-Gay called "an extraordinary success." Other government data published Tuesday showed economic activity fell 4.7 percent in October from the same month in 2015, as the economy remains in recession a year into center-right President Mauricio Macri's administration.
The economy was flat in October compared with September, and had contracted 2.6 percent cumulatively through the first 10 months of the year. The government hopes that funds declared under the tax amnesty will help jump-start growth and boost tax revenue. Argentine bonds and shares listed on the Merval stock index jumped on the news of the assets declared so far, as any figure above $60 billion would have been seen as a success.
Argentines are thought to have more than $400 billion in undeclared overseas assets. Under the tax amnesty program, they have until December 31 to declare those assets while paying a 10 percent fine to protect themselves from prosecution for tax evasion. They can still declare until March 31, though the penalty for non-real estate assets will jump to 15 percent. Billions more are expected to be declared, particularly in properties, for which a 5 percent fine would remain unchanged. Last week, Argentina signed a tax information exchange agreement with the United States, a factor in the success of the program, tax attorneys said.
The government had collected 82 billion pesos ($5.27 billion) in fees paid by those who declared assets in the tax amnesty through Monday evening, representing about 1 point of Gross Domestic Product, or nearly double what similar efforts in other countries have yielded, Prat-Gay said.
That would help the government stick to its target for a fiscal deficit of 4.8 percent of GDP in 2016, even though revenues had fallen short as the economy performed worse than expected, Prat-Gay said. Prat-Gay will leave his post at the end of the week after Macri asked for his resignation, cabinet chief Marcos Pena said on Monday, citing disagreements over management style and team structure. The Finance Ministry will be split into two. Current finance secretary Luis Caputo will lead a division focused on sovereign debt management while economist Nicolas Dujovne, considered more of a fiscal hawk than Prat-Gay, focuses on the budget.