The complications of the tax on large fortunes

Photo Ivan Cachanosky
Ivan Cachanosky

Lic. in Business Administration. Master in Applied Economics of the UCA. PhD in Economics from the UCA.

Diego Piccardo

Economic Analyst in Libertad y Progreso.

DATA CLAVE- Albert Einstein used to say “if you are looking for different results, don’t always do the same thing.” However, it is a lesson that Argentina does not seem to understand. Congress will finally debate the Large Fortune Tax, also called the wealth tax. With the discourse that the richest have to be in solidarity at this time of crisis, the government intends to go out and raise funds whatever it takes.

What the government does not take into account are the effects that the imposition of this type of taxes brings. In a country in need of investors who dare to sink their capital, the measure works against the interests of Argentines, driving away anyone who wants to undertake in our territory. Precisely, what is scarce in Argentina are investment dollars. In addition, it joins other measures that cast doubt on private property such as the attempted expropriation of Vicentin, the taking of lands in Guernica and the Etchevere case, among others.

The question that those who are thinking that this type of tax is beneficial for the country have to ask themselves, is how many investments we will not see coming, how many jobs will not be created and how much our salaries will be reduced because of this measure. You always have to see what you see, but also what you don’t see.

These points are important to fully understand why it is convenient that this “solidarity contribution” is not approved (which, we agree, does not have anything to do with solidarity because it is a mandatory confiscation of private sector resources). In addition, it presents complications in its implementation. For example, since it is a tax that is charged on wealth, those who become taxed probably do not have the liquid money to pay it immediately. To do this, they will have to divest assets, such as company shares. By selling shares to get money to pay the tax, they lose shareholding and thus no longer have control over the companies they currently manage. Faced with this situation, before losing their job as director of any company, they will surely decide to leave the country to avoid the tax and / or initiate legal claims against the state.

In the event that the tax is paid, what will happen is that the money that was in the hands of a private person (which he earned thanks to his work) and that was going to have a productive destination, goes to finance the large state bureaucracy, which is historically bankrupt.

However, the most serious thing of all is the terrible signal that is sent to potential investors and to those who today are not taxed by this contribution is that no one can confirm that in the future a tax of this type will not fall on them, which further increases the levels of uncertainty.

So why produce and waste time on something that someone else will probably end up taking? The incentives they create are contrary to those that should be sought since, by forcing people to dispose of assets, it can be considered an attack against private property, and a country without rules that guarantee that right is an unviable country for any type of investment.

Argentina has to change. We cannot continue fighting capital because it is what pays the workers’ wages at the end of the month, what allows creating more and better jobs and what lifts people out of poverty. It is the private sector with its companies that produce the goods and services that we consume every day. If we charge taxes to any company that tries to create jobs because the State is not efficient in managing its fiscal accounts, the path will continue to be that of impoverishment.

To get ahead, a pro-institutional environment must be created, where the rules of the game are clear so that entrepreneurs (both local and international) feel safe when investing in Argentina by offering new brands, new products in our country. But to travel this path, the first step is to stop hindering and complicating the private sector with this type of measure.