ARGENTINA: Argentina's tax agency slaps a 15 percent levy on overseas credit card purchase in another measure to try and keep dollars at home to pay debts

Record ID: 447143

  • Title: ARGENTINA: Argentina's tax agency slaps a 15 percent levy on overseas credit card purchase in another measure to try and keep dollars at home to pay debts
  • Date: 31st August 2012
  • Summary: VARIOUS OF TAX AGENCY INSPECTOR AT CURRENCY EXCHANGE COUNTER AT THE AIRPORT
  • Embargoed: 15th September 2012 13:00
  • Keywords:
  • Location: Argentina
  • Country: Argentina
  • Topics: Finance
  • Reuters ID: LVAE78TKI69DGUSSHQ2TDHDWMIFM
  • Story Text: Argentina said on Thursday (August 30) it would impose a new 15 percent charge on credit card purchases abroad as it cracks down on foreign currency purchases in a bid to keep dollars in the country.
    President Cristina Fernandez, who has earmarked billions in central bank reserves to pay debt, imposed controls on foreign currency purchases late last year which have since been tightened considerably.
    Buying dollars and other foreign currency is virtually banned and Argentines cannot use debit cards overseas, forcing many to turn to the black market and pay a high premium over the official exchange rate.
    Overseas credit card use has also risen in recent months as Argentines seek to skirt the controls and buy foreign currency at the official rate.
    The AFIP tax agency said the levy could be used as a tax credit to be deducted from income or wealth tax at the end of the year.

    "The credit card, or the personal individual card is going to withhold or charge an additional 15 percent which will go to the tax agency, the AFIP. Accordingly it will be taken as a payment of income taxes. If this adds up to more income taxes than the taxpayer should pay in income taxes it will be applied as a personal property tax," an economist specializing in tax issues, Raul Cuello, said.
    The measure, due to be published in the government's Official Gazette on Friday (August 31), will come into force from September.
    Argentine residents and travellers say the new tax makes it that much more difficult to make transactions at the official rate of $1 to 4.6325 pesos.

    "The dollarup being a joke because of what this means to the real value of the dollar. This (using credit cards) was the only way left without counting savings, which has been limited. The official dollar is the parallel but, basically, an official dollar no longer exists," traveller Juan Manuel Garcia told Reuters.
    Ricardo Wolff is from Brazil, but lives in Argentina and often travels for business.

    "Truthfully, for my job here, I have to travel abroad and we depend on the cards to make payments and this makes a huge impact because it costs a lot more. Another impact is that it is impossible to change money. So it is almost impossible. Everything is a lot more expensive. All business transactions are blocked," Wolff said.
    Cuello said the measure accomplishes a few primary goals for the government.

    "There are a number of things to look at here. First, the watchdog aspect of this. They are going to have better control over purchases overseas. Second, the tax collections. They are going to collect 750 million pesos a year. And third, to try and discourage purchases overseas because the individual, knowing he will be watched and subject to withholding payments is going to try to not make purchases overseas," Cuello said.
    The AFIP said it would affect "high income" Argentines holding about 168,000 credit cards that clocked up foreign purchases of some 7.4 billion pesos ($1.6 billion) over the last year.
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