Argentina to Fight Tax Evasion with FX Measures

June 9, 2010 Taxation in Argentina

Monedas (close up)The Government of Argentina has announced that it will institute new foreign-exchange regulations in order to fight tax evasion and money laundering, and increase the transparency of the currency market.

On June 7th the Central Bank of Argentina (CBA) announced its intention to introduce tighter regulations to the trade of foreign currency. Under the new rules, individuals and businesses purchasing foreign currencies valued in excess of USD 250 000 per calendar year will be required to provide proof of income and corresponding tax data. Buyers will have to prove adequate declared assets to justify the currency purchase. Additionally, the transactions carried out above the preset limit cannot be settled with cash, and are restricted to wire-transfers and cheques. The same regulations will also apply for transactions valued above USD 20 000 in any given month. Legislation governing foreign exchange for the purpose of imports, dividends and overseas debt payments will be unchanged.

The new regulations come as a response to recent criticisms leveled at the CBA that it was not exercising enough measures to combat money laundering. Political analysts in Argentina have explained the move as a tax revenue raising measure by the Government, aimed at garnering voter support for the upcoming October 2011 national election.

Despite the CBA’s claim of the currency exchange regulations being aimed at protecting the economy from tax evasion and curbing money laundering, local economists suggest that the measure is a move to increase the Bank’s control of the economy by influencing the international market for the Argentine Peso and local demand for US dollars. Economists supported the view by highlighting the Government’s recent decision to pay off current debts with its international currency reserves.

According to the CBA the regulation announcement has not had adverse effects on the value of the Argentine Peso. On the day of the announcement trading of the peso closed marginally higher than at market open. The CBA issued assurance to the economy and traders, saying in a statement, “…this [regulation change] won’t have any impact on smaller operations, only on larger ones.”

Photo by julianrod