March 11, 2014
Tax amnesty ends tomorrow
Total cash collected is likely to be under US$650 million
The tax amnesty law to whitewash undeclared cash, particularly aimed at dollar hoarders, is set to expire tomorrow, amid rumours that it could be extended yet again as the final tally fell far short of initial expectations.
As the previous deadline on October 1 neared, the Fernández de Kirchner administration decided to push it back another three months in a move that was seen as electoral in nature with the government uneager to declare a failure so soon before the midterm elections later that month.
The total collected to date through the whitewash scheme is unclear, but it is likely to be under US$650 million, the vast majority of which was carried out through the CEDIN real estate certificate.
During its first phase, approximately US$340 million entered the state’s coffers, well below the US$4 billion that some had said was the government’s goal. The Kirchnerite administration’s bid to reactivate stagnating real estate and energy sectors also underperformed.
Back in October, AFIP tax bureau head Ricardo Echegaray bemoaned banks’ hesitation as a pivotal factor in such underperformance, saying they imposed “excessive safeguards,” because they were worried about being investigated by government institutions tasked with looking into money-laundering.
However the sharp decline in Central Bank reserves seen throughout the year might encourage yet another extension in order to inject much needed greenbacks into the economy.
The amnesty, approved by Congress, was opened to the public on July 1, although the Executive was assigned the choice to delay its expiration date.
With the exception of those facing legal charges or investigations, people or companies were given the option to exchange their foreign currencies for the CEDIN or BAADE energy development bonds.
The CEDIN is a certificate of deposit with the Central Bank that can be exchanged for cash once there is proof of a real estate-related transaction. The BAADE, on the other hand, is a bond that would go toward financing energy development, although the government never outlined exactly where the raised cash would go. Both of the instruments can be purchased by citizens or companies through declared or undeclared money.
After its extension in October, then-Domestic Trade secretary Guillermo Moreno held meetings with various sectors in a bid to drum up interest in the investment vehicles. As a result, the Bridas energy group said it would invest US$500 million in the BAADE, but emphasized it would not fall into the whitewash measure because all of the cash was declared.
With opposition leaders slamming the measure as an effective get-out-of-jail-free card for drug-traffickers, government officials quietly recognized that setting such a high mark at the beginning had been a mistake.
The final day before the last extension saw the highest level of revenue in 24-hours, with US$82 million collected in CEDIN certificates. But the absence of calls to invest arguably make this unlikely for tomorrow, as the government reportedly mulls over how to rework and make the measure more attractive should it choose to prolong it again.
Herald with DyN