FINANCE-ARGENTINA: Multinational Tax Evaders Rock System

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Sep 10 1998 (IPS) - Argentina has a new tax law from Thursday, aiming to stop evasion estimated at around 28 billion dollars per year, by companies including 91 freight contracters for Coca Cola, IBM, Siemens and the privatised YPF oil firm.

The tax reform, a requirement imposed by the International Monetary Fund (IMF) extending Value Added Tax (IVA) to sectors previously excepted, was approved by the lower house early Thursday.

In the same session, ruling party deputy Oscar Lamberto issued his denunciation of the 91 tax-evading businesses.

The IMF claims if the State increases potential collection it will bring in more taxes and manage to neutralise the fiscal deficit. But economists and tax experts agree the problem does not lie so much with the exceptions as the evaders.

“The weak Argentine tax system allows multinationals to declare losses and avoid paying tax on their proceeds,” revealed Lamberto.

In order to show a loss, the companies buy expensive in this country and sell cheap in others. They take out loans and appear to make no profit.

In Argentina, IVA is a 21 percent consumption tax, and evasion of this runs at around 18 billion dollars, 40 percent of the total which should be collected, an aspect which will remain unchanged by the extension of the tribute to private medicine, cable television, publicity and aircraft.

The opposition could not push through their propsal to drop IVA on staple consumer goods, above all foodstuffs, to give a more progressive slant to the tax reform.

Income tax evasion is estimated at around eight billion dollars. This is the tax the companies named by Lamberto – mostly transnationals – avoid paying through manoevres orchestrated with their head offices. Volkswagen, Nabisco and Laboratorios Bago are all in the sin bin.

Lastly, the tax on personal assets only brought in some 670 million dollars of a far larger potential figure. The State should be making around two billion dollars more, but in fact never even gets half-way there.

Total evasion is high considering the Gross Domestic Product is currently around 345 billion dollars, projected to reach 400 billion in the year 2000.

This Thursday the deputies also approved the creation of a 750 million dollar fund based on a new tax for funding public education, while teachers continued 17 months of protests and stoppages calling for a higher budget and better salaries.

The 1.5 percent tax on the sale of cars worth more than 4,000 dollars, aeroplanes, boats and high-powered motorcycles will allow them to collect the total amount asked for, said the teachers.

Under the law creating the fund, if this sum is not reached, the State must contribute the shortfall with its own funds, but the Economy Ministry is expecting the Executive Power to veto this clause.

The government has already said it may not be able to guarantee collection of the full amount, prompting harsh criticism from teachers who are threatening to step up protests.

Tax expert, Luis Maria Pena, said only a few days ago the national and multinational companies are large-scale evaders when they should be the big contributors.

“Eighty five percent of tax payers contribute only 15 percent of the sum collected, but the remaining 15 percent evade 85 percent of what should be collected,” said Pena.

Lamberto also stated it was the small tax payers who keep the tax system going.