With the aim of "protecting reserves for production and job creation,” the National Government announced on Wednesday that it would increase the tax burden on dollar purchases made abroad.
Changes to the so-called ‘tourist dollar’ exchange rate were made effective immediately (October 12). The government also announced a measure aimed at concertgoers, who will have to pay an additional 30 percent tax on tickets for shows in which the artists charge in foreign currency.
The latter step earned the informal title of the ‘dolár Coldplay’ because the British rock band sold out 10 shows in Buenos Aires to be played later this month, more than any other city on its worldwide tour.
The changes, which mostly affects consumption with credit and debit cards in foreign currency, are aimed at stymying travel abroad and trimming spending in dollars on luxury goods, concerts and sporting activities.
They add to an existing roster of policies – from capital controls to import restrictions – that aim to protect the government’s foreign currency reserves and meet targets outlined in a US$44-billion programme with the International Monetary Fund.
The government said the changes would impact citizens and foreign residents who spend more than US$300 per month. They will be hit with an extra 25-percent charge on top of two existing levies. Spending on digital platform subscription fees will not be affected, except for new customers.
The changes have been introduced as part of a renewed government effort to discourage the outflow of foreign currency, in the midst of a shortage of Central Bank reserves and in anticipation of higher demand related to the 2022 World Cup in Qatar and the upcoming summer season.
Given the proximity of the change to football’s premier international tournament, the new rate for large purchases was swiftly dubbed the ‘dolár Qatar.’
The official intention is to allocate available dollars for the productive sector of the economy and reduce those destined for leisure.
"The requests and demands of business chambers and productive sectors were taken into account," an AFIP source told the Noticias Argentinas news agency.
Wednesday’s announcements mean there are now three main categories for the so-called ‘dolár tarjeta’ rate.
Firstly, for the so-called ‘dolár Qatar,' consumption in dollars with credit and debit cards surpassing US$300 per month, mostly flights abroad and tourist packages, will be subject to an additional 25 percent tax. Given the current Banco Nación official exchange rate of 157 pesos per greenback, this new levy, plus the PAIS tax (30 percent) and levy on account of income and personal assets (45 percent), takes the value of each dollar per transaction to 314 pesos.
Secondly, for purchases of luxury goods made overseas (such as high-end cars and motorbikes, private jets, small planes, recreational boats, premium alcoholic beverages, watches, jewellery etc.) citizens will face the PAIS tax (30 percent), levy on personal assets (45 percent) plus the new measure (25 percent), also taking the value to 314 pesos per US dollar.
Finally, for services contracted abroad for recreation and artistic activities (such as recitals, sports activities, among other entertainment expenses), a new official exchange rate will be created that is also affected by the PAIS tax (30 percent), resulting in an estimated dollar value of 204 pesos.
All new rates will adjust proportionally depending on the value of the official exchange rate.
In total, the changes affect some 200,000 people, according to statistics on spending in August recorded by the AFIP tax agency, equivalent to seven percent of all spending in foreign currency.
According to reports, it would not include current subscription fees for Netflix, Spotify and similar platforms, although it will have an impact on new customers.
For purchases in dollars with credit and debit cards of up to US$300 per month, there will be no change to current levies. Considering the official exchange rate, that means the PAIS tax (30 percent) and the levy on personal assets (45 percent), resulting in an estimated value of 275 pesos per greenback at present.
Criticism and support
Reacting to the changes, opposition leader and City MayordHoracio Rodríguez Larreta slammed the “improvisations” of the Fernández administration.
"It is impossible for anyone to invest in the long term in Argentina if you don't know if you have the ‘dolár Coldplay’ or the ‘dolár Qatar,’" he charged. "We need a plan and an end to these improvisations one after the other."
Coalición Cívica leader Elisa Carrió also slammed the move, declaring that “not even the Venezuela of Chavismo had so many exchange rates."
Marcelo Figoli, the president of Fénix Entertainment Group which brings international musicians to Argentina for performances, said the new measure is “a solution giving us predictability and clearer rules.”
Detailing the scheme, he said: “A dollar is going to be bought which is going to be the official one, plus 30 percent.”
"The whole entertainment and culture industry had restricted access to the currency some time ago. There were a lot of events where the promoters could not pay the artists, who came thanks to the trust they had in us,” Figoli told the appropriately named Pan y Circo show on Radio Rivadavia.
"Everything that is entertainment generates a significant amount of work paid in pesos, not in dollars. There are hundreds of thousands of people working in the sector," he added, defending the measure.
However, Carlos Rottemberg, the president of the Asociación Argentina de Empresarios Teatrales y Musicales, countered in an interview that the problem was specific only to the music sector.
"I am a theatre businessman, not a music businessman, and we charge and pay in pesos; the problem here is with the music sector,” he told the Metro 95.1 radio station.
"If no foreign artists come, we create a 'second pandemic' in the sector because all these activities move many direct jobs," explained Rottemberg, stressing that he would be forced to use the ‘dolár Tarjeta’ or ‘dolár Qatar’ rates.