Argentineans are known for keeping their money under their beds rather than putting it in a bank or paying tax on it and now the government if offering them an amnesty to free it up. Economy Minister Hernan Lorenzino wants them to declare the cash, mostly dollars, including any that is languishing in bank accounts in foreign tax havens, and has declared they will not face criminal penalties for hiding it.
In return for depositing the ‘missing’ money at the country’s Central Bank, people will be issued with tax free bonds and certificates of deposit with the bonds paying interest of 4% until 2017. Lorenzino said that when approved there will be an Argentine Bond for Saving and Economic Development, and the other investment option is a certificate for both the construction and real estate sectors.
The aim is that there will then be enough money in the banking system to finance energy and construction projects which will in turn create jobs and stimulate the Argentinean economy. Officials said that the amnesty, which had to be approved by Congress as it means a change in the law, will last for a fixed period of three months and that both individuals and business can benefit.
Quote from Gringos.com : “HSBC has been accused of facilitating money laundering and tax evasion in Argentina, allowing clients to hide more than $100million. The Argentinian government is pursuing a criminal investigation into the banking giant after accusing it of creating an illegal scheme enabling clients to hide millions of dollars.”
However, Ricardo Echegaray, head of the AFIP tax office, said that elected officials and anyone facing money laundering investigations cannot participate. ‘We have a long list of people facing charges who are not eligible,’ he pointed out. ‘This is an extraordinary measure that constitutes a big opportunity. I don’t know if it will be repeated in our lifetimes. There is no precedent for a tax amnesty of this nature,’ Echegaray.
Wealthy people in Argentina tend to hoard dollars as they have lost confidence in the peso and inflation of 25%. There has been a growth in illegal currency markets where they’re now trading nearly 10 pesos for each dollar, close to half the official value of 5.2. According to the AFIP tax office there is an estimated 40 billion dollars inside Argentina in the informal circuit and 120 billion invested in overseas assets or deposited in tax havens.
‘We target those with undeclared dollar savings so they can use them for investments,’ Lorenzino explained.