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Argentina proposes tax hikes on private sector

Argentina's government will tighten currency controls and implement new taxes in order to fund new social security expenditures, Finance Minister Martin Guzman said Dec. 17 in a news conference.

The new center-left administration will send a bill to Congress in which economic emergency powers are expected to be granted to the executive branch. The latest measures include a 30% tax on all purchases made by Argentines abroad, as well as on purchases of U.S. dollars in the local market.

Under acute financial stress, former president Mauricio Macri had already established currency controls in the country, limiting the amount of monthly purchases of U.S. dollars to $200 per person.

70% of what is collected through that tax will be used to address social security concerns, while the remaining 30% will be channeled to infrastructure projects, the minister said.

The government also unveiled an increase in wealth taxes in general, and with a higher rate for assets held abroad, as well as a rise in export taxes for soybeans, wheat and corn.

Minister Guzman also announced a freeze on utility rates, and a 180 day period for companies to modify their rate schemes, so that they are "adequately balanced."

The minister did not provide details on inflation or fiscal deficit targets for 2020. The decision to increase taxes on dollar purchases by 30% has already impacted on the informal exchange rate, which rose as much as 10% in a day to over 70 pesos per dollar.

The new taxes will come into effect whenever the bill gets approved, which could be as soon as this week.