In an eerie glimpse of what a cashless society enables, the government of Argentina has taken the drastic step of mandating banks to report every credit card purchase to the tax authorities, AFIP. Also introduced on Friday, another measure adds a 15 percent tax surcharge every time a purchase is made outside the country using a credit card issued by an Argentine bank.
This action targets those people that have been using credit cards as a way to purchase at the official rate rather than the black market rate, in effect creating a dual credit card exchange regime. Capital flight is high in Argentina due the depreciating peso and currency controls are becoming more and more aggressive.
The black market peso price has spiked as the government has tried to close off any and all avenues for people to legally convert out of pesos and into US dollars. A 15 percent tax surcharge will close some of the gap between the regulated official rate and the black market rate, currently at 4.63 pesos per dollar and 6.39 pesos per dollar respectively. In theory, this new surcharge is deductible against future taxes owed so it’s really an advance payment. But in practice, its real value as a deduction will have been eaten up through inflation and it’s meaningless for those that don’t earn enough income to owe taxes.
On Monday, this new rule was broadened to include debit cards and purchases at any online site outside the country, which targets Amazon and eBay purchases.
But the measures go much farther, according to Michael Warren of Associated Press, “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 $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.
Even the socialist President Jose Mujica of Uruguay called the new measures “crudely protectionist” in a radio interview from Montevideo. Tourism and investment to the area has already been suffering.
This articles focus is on how the advent of the cashless society utopia has actually advanced the cause of financial repression.
These are brutal, important lessons in why a cashless society should not strip everyone of their transactional and financial privacy. For those people in Argentina that want to bypass currency controls and also shelter their money from government-induced inflation, this Buenos Aires exchange community claims to buy and sell bitcoin for Argentine pesos. And, the mercaBit.eu exchange sells bitcoin for Ukash vouchers, which are available in Argentina.
JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.