Argentina was struggling to cope with problems even before the coronavirus pandemic. However, the pandemic created additional problems for the local economy. Recently, the country passed a new wealth tax to help the government pay for health supplies as well as economic relief measures amid the ongoing coronavirus pandemic.
It is worth noting that lawmakers in the Senate passed the bill, dubbed the “millionaire’s tax” by 42 votes to 26 on Friday. As a result, those with a personal fortune of more than 200 million pesos ($2.4 million). Interestingly, approximately 12,000 people will have to pay a one-off tax of at least 2%.
According to the country’s government, the legislation could see Latin America’s third-largest economy collect up to $3.7 billion. They want to use funds collected from wealthy people to buy medical equipment and supplies, provide support to small and medium-sized firms, as well as to help poor neighborhoods.
As mentioned above, the country suffered serious losses due to the coronavirus pandemic. The number of cases in the country is high. Strict public health restrictions created problems for the local economy already reeling from high levels of unemployment, rising levels of poverty, among other problems.
It is worth noting that the Organisation for Economic Co-operation and Development (OECD) has forecast Argentina’s gross domestic product (GDP) to contract by 12.9% in 2020. Moreover, it expects the country’s recovery from the coronavirus pandemic to lag behind every other major economy.
Argentina and coronavirus pandemic
According to one of the authors of the new wealth tax, it would impact 0.8% of the country’s taxpayers. However, opposition lawmakers criticized this tax. They think that taxes are unlikely to be a one-off and they could deter foreign investment.
It is worth noting that, of the proceeds raised by the levy 20% would go toward medical supplies. Moreover, 20% would go to small and medium-sized companies. Also, 15% would go to social developments and 20% to student scholarships, and the rest to natural gas ventures.
However, in the best scenario, the latest wealth will provide a one-time boost to state coffers. However, it won’t solve the problems in the long run. As stated above, Argentina was struggling to deal with problems even before the coronavirus pandemic. The country’s government should work with experts to boost the economy. Moreover, the government should try to find other ways to cope with problems, as by raising taxes the government could deter foreign investment.