Argentina casts ever-watchful eye on credit cards to stop tax evasion
By Michael Warren ,APBUENOS AIRES -- Argentina just made it more expensive for its people to use credit cards outside the country, and more dangerous for cardholders who aren't paying all the taxes they should.
September 2, 2012, 12:05 am TWN
One measure published in Friday's official bulletin adds a 15 percent tax every time people make a purchase outside the country using a card issued by an Argentine bank. Another requires the banks to report every credit card purchase, home or abroad, to the tax agency.
The moves target Argentines who have discovered that by using credit cards outside the country, they can get around increasingly tight currency controls and shelter their money from soaring inflation. Purchases outside Argentina using peso-denominated cards soared 48 percent in June compared to the year before, obligating the central bank to send US$289 million out of the country in just one month. Overall capital flight soared to US$23 billion in 2011.
AFIP chief Ricardo Etchegaray, the government's top tax collector, presented the moves as populist measures that would only affect the wealthiest Argentines, and mainly when they travel outside the country — a reduced group of 168,000 taxpayers who charged US$1.5 billion in the last 18 months.
But a closer look shows the measures go much farther, giving the government powerful new tools to combat widespread tax evasion.
Tax and customs agents now will be able to compare better what Argentines declare to the customs and tax agencies with what their credit card bills say. Before, the reporting requirements applied only to expensive charges of more than 3,000 pesos (about US$645). Now, every single purchase by every co-signer must be reported. And if the totals show people are living large while claiming to be paupers, they could get into big trouble.
“From October onward, (card-issuers) must report in detail all purchases made by cardholders and their co-signers, starting in September, both within and outside the country,” said Etchegaray. “With this move, AFIP seeks to assure that taxes are paid by those contributors who are able to pay more.”
Argentines don't have to declare their income unless they are salaried and make more than US$20,000 a year or are self-employed and make more than US$30,000, so many register with the tax authorities as if they make less than the limit, dealing in cash and trying to keep their income and purchases off the books.
But Argentina also taxes accumulated wealth, giving the government license to scrutinize people's private property to an extent that foreigners are ill-accustomed to. People whose incomes don't match their lifestyles can find themselves closed out of the financial system until they come clean.
Since November 2011, Argentina's government has sought to stem capital flight by closing down nearly every avenue people have to legally trade their inflationary pesos for U.S. dollars. The black-market peso price has spiked as a result, trading now at 6.37 pesos to the dollar, compared to the official rate of 4.65. That 37 percent gap represents what people with undeclared pesos have to lose in order to convert their cash to dollars inside Argentina.
Credit cards, meanwhile, are paid at the official rate, and many cardholders have figured out ways to use them to avoid this loss. The 15 percent tax raises the effective cost of purchases to 5.35, reducing the gap by nearly half.