Argentina's new government to end capital controls, plans tax amnesty

Tuesday, 01 December 2015
On December 10, Mauricio Macri will assume Argentina's presidency following his election on November 22. Three days later he appointed former Central Bank of Argentina President, Alfonso Prat Gay, to the role of Minister of Finance – he will undertake one of Macri's most popular campaign promises: the removal of capital controls. The government is reportedly currently considering a draft bill for a tax amnesty and is also expected to amend the taxation of capital gains and income.

On November 22, Argentina elected Mauricio Macri, leader of the center-right opposition party Cambiemos (En: Let's Change) as President.

Macri will assume the presidency on December 10 and announced on November 25 the appointment of Alfonso Prat Gay to the post of Minister of Finance. Prat Gay is former President of the Central Bank of Argentina and according to the Financial Times his first task will be the removal of capital controls in place since 2011 – a promise Macri had made in his election campaign. Fox Latino explains that lifting these restrictions on buying US dollars could "eliminate a booming black market for foreign currencies that creates distortions in the economy".

It is reported that the result of the election may attract international investors. "[I]nvestor excitement is tangible" with companies "including Germany's BayWa AG and Brazil's BRF SA […] prepping to expand their presence in the country," says Bloomberg.

Javier Canosa TEP states that the removal of capital controls is one of two measures of "particular interest to the private client and private client advisor practicing in Argentina" as "the termination of the exchange controls will allow for the transfer of funds overseas – including dividends and other payments". The second notable measure being "a new proposed tax amnesty, as a prelude to the full application of the Common Reporting Standard in 2018". Cronista reports that Prat Gay's team is currently considering the draft bill for a tax amnesty that would "pardon sanctions and interest and create a payment plan of 60 instalments with an initial payment of 5 per cent of the tax due".

News reports have also intimated some of the possible tax measures that the new government may implement. Iprofesional states that the new government is considering "an improvement" to capital gains tax with the "correction" of the minimum non-taxable amount: ARS25,000 for unmarried persons with no children and ARS35,000 for a married couple with two children. There are also plans to revert the amount of tax each employee pays to the levels they paid in 2006 – 2007 (before the inflationary process started).

It has also been reported that Macri's government would push to expel Venezuela from Mercosur (the South American trade bloc) which may affect its position in the continent as "many countries, including neighbours Chile, Brazil and Bolivia, have […] maintained close ties with Venezuela".

Sources

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