Lawmakers in Argentina’s lower house on Wednesday approved a bill that will see the nation’s wealthy citizens hit with a one-off capital levy on assets.
After lengthy debate, the initiative passed a vote, gaining 133 votes in favour, with 115 against and two abstentions.
The Chamber of Deputies began discussing the bill on Tuesday afternoon and debate continued until a vote in the early hours of Wednesday morning. It now heads to the Senate for debate, which will likely consider it before the end of the month.
The so-called "wealth tax," backed by President Alberto Fernández’s government, will see individuals with more than US$2.3 million in assets make an “Extraordinary Solidarity Contribution.” State coffers running low amid the coronavirus pandemic and officials are hoping the tax could rake in upwards of US$3 billion.
The one-time “extraordinary contribution” was rejected by the opposition Juntos por el Cambio coalition, which branded it "confiscatory."
Echoing the voices of some business chambers, party lawmakers said it would undermine private investment, despite the bill affecting individuals and not companies.
"This is a lousy tax because it is going to ward off any hint of investment in Argentina," said opposition lawmaker Javier Campos.
"Argentina already has many taxes and very high tax evasion. Instead of creating new taxes, what must be done is the efficient collection for those that exist," argued opposition lawmaker Álvaro González.
"The opposition is looking for arguments that go against the objective of this bill,” countered Peronist deputy José Luis Ramón. “They say that it is a tax but it is an extraordinary contribution and only this one time, due to the pandemic."
In the end, the ruling coalition had the numbers it needed to render the point moot. The two absentions were from left-wing lawmakers who presented their own counter-proposal.
The business sector is divided on the law. Generally, chamber groups and large firms reject the initiative, while small- and medium-sized businesses are more likely to back it.
"The bill will end up decapitalising companies that invest, produce and sustain employment in a health emergency context," complained the powerful Argentine Industrial Union.
The contribution is for individuals with large fortunes and will not be imposed on companies.
According to estimates, the levy will affect between 9,000 and 12,000 of Argentina’s richest citizens. The one-time contribution will affect individuals whose declared assets exceed 200 million pesos and runs at a progressive rate of up to 3.5 percent for assets in Argentina and up to 5.25 percent on assets and goods outside the country.
"We do not have a problem with the private sector, we need the private sector, together with the public sector, investing together. What discourages investment are bad governments," said deputy Máximo Kirchner, one of the bill’s sponsors and the leader of the Frente de Todos bloc, during the debate.
The bill says the “extraordinary contribution” is a one-time measure. It establishes that 20 percent of what is raised from the levy will be used for medical supplies to attend to the Covid-19 health emergency, with another 20 percent for programmes to help small and medium-sized businesses (SMEs, PyMES), 15 percent for social development programmes, 20 percent for student scholarships and 25 percent for development programmes related to natural gas.
The law provides for higher rates for assets located abroad, but offers relief for those who decide to repatriate them in whole or in part.
Peronist lawmaker Carlos Heller, who co-authored the bill with Kirchner, said that the levy would affect “10,000 people, 0.8 perent of total taxpayers. Forty-two percent have dollarised assets, of which 92 percent are located abroad. It is clear that this contribution is far from a tax on productive activity,” he said, railing against what he called “lies” that he alleged were attempts to slander the bill.
"The level of concentration of wealth, in a few hands, is so strong that this contribution falls on less than 0.02 percent of the population,” said government deputy Fernanda Vallejos during the debate. “About half of what is collected will be contributed by only 252 people, those who are at the top of the pyramid.”
As lawmakers debated inside the lower house, thousands of pro-government supporters rallied outside Congress to show their backing for the initiative. Others staged vehicle caravans and tooted car horns to call for the bill’s approval.
The government hopes that the levy on large fortunes will help strengthen its fiscal balance. Over the past eight months, the Alberto Fernández administration has allocated millions of dollars in aid to the private sector to alleviate the economic impact of the lockdown imposed to tackle the advance of the coronavirus, while raising social support payments for workers in the informal economy.