Argentina’s Ruling Bloc Proposes New Tax on Millionaires

Argentina’s ruling coalition, Frente de Todos, is seeking to impose a one-time tax on wealthy citizens as part of a strategy to solidify the alliance’s left-wing credentials while boosting government revenue amid a deteriorating economic crisis.

The so-called “solidarity” tax would apply to approximately 12,000 Argentines that have over 200 million pesos ($2.7 million) in assets, according to a statement by the coalition’s press office in the lower house of congress, where the bill was presented on Friday. The tax would scale up to as much as 5.25% for ultra wealthy citizens holding their fortune in assets outside the country, it said.

The proposed legislation is another move by President Alberto Fernandez’s government that’s hurting Argentina’s business climate since he took office Dec. 10, leading an alliance of different Peronist factions. Last week, the president announced a halt on Internet, TV and mobile services prices until the end of the year. His government had already frozen prices on over 2,000 other consumer goods and tried to nationalize the country’s top soy trader.

Fernandez’s administration needs to boost revenue to close a growing fiscal gap caused by a plunge in tax collection due to his government’s strict lockdown. Without access to credit, Argentine authorities have relied on printing money to finance stimulus measures to fight the pandemic.

Coalition leaders estimate the bill would rake in 300 billion pesos in tax revenue that will be repositioned for small and medium-size businesses, medical equipment needed to attend Covid-19 and public works in low-income neighborhoods.

The bill is spearheaded by Congressman Maximo Kirchner, the son of Vice President Cristina Fernandez de Kirchner, who governed the nation with populist policies from 2007 to 2015 and is the main face of Peronism’s left-wing sectors.

The proposal comes as Argentina’s private creditors faced a Friday deadline to accept the country’s offer to restructure $65 billion in bonds, which many creditors have already agreed to in principle. The final results of the debt swap are expected as early as Monday.

The wealth tax is also likely to be part of Argentina’s negotiations with the International Monetary Fund for a new program that will replace a failed $57 billion bailout given to the country in 2018. Economy Minister Martin Guzman sent a formal letter to the IMF this week requesting to begin negotiations.

Total Wealth in Argentina and abroad (pesos)Tax rate

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