By Charles Newbery
BUENOS AIRES
Argentina’s government lashed out Tuesday at what it said was criticism of its clampdown on tax evasion, a move seen as an effort to deflect public attention from economic and political turmoil.
“We have to stop this double standard, this double moral of criticizing the government and at the same time hiding money in Swiss bank accounts,” Cabinet chief Jorge Capitanich said during a televised press conference.
He spoke after legal delays in a case the national tax agency exposed last week involving approximately 4,000 undeclared bank accounts of Argentine residents in HSBC in Switzerland, allegedly funded with the aid of the bank’s branch in Argentina.
A judge declined to hear the case last week, and now a second judge said he is still considering whether to take it.
“We have to fine those that are responsible” for evasion, Capitanich said.
This is the latest probe into suspected tax dodging as Latin America’s third-largest economy contracts and capital flight surges. More Argentines are buying dollars – or sending them out of the country – to protect their savings against 40 percent annual inflation, among the world’s fastest.
Social unrest is also on the rise, with unions threatening to go on strike this month to demand less tax pressure that is reducing consumer spending power and making it harder to get by.
The pressure is increasing, too, for the government to explain what it is doing with all the taxes it collects, said Carlos Germano, a political consultant at Carlos Germano y Asociados in Buenos Aires.
Tax pressure is about 43 percent of gross domestic product in Argentina, among the world’s highest, according to the Mediterranean Foundation, a think-tank in Cordoba, Argentina.
That is higher than 24 percent in the U.S. and 33 percent in Spain, and only short of the more than 50 percent of Nordic countries, its data shows.
“Despite the heavy tax pressure, people believe that the government is not providing the services it should,” he said, listing growing complaints about poor public education, health care and security.
To deflect some of this criticism, the government is trying to point the finger at evaders, in particular those supposedly rich enough to keep funds in overseas tax havens such as Switzerland, Germano added.
He said Argentine residents hold between $120 billion and $150 billion outside the country, or around the size of the national debt.
And given that Argentina cannot borrow abroad because it has yet to fully restructure a $100 billion bond default from 2001, this makes the hunt for tax cheats even more important to finance the state and pay the national debt.
In 2013, the tax office clamped down on evasion in the transfer of football players to European leagues, a big business in Argentina. Celebrities have been ratted out, and the tax agency uncovered cases of tax underreporting by those who travel to watch boxing matches in Las Vegas and the World Cup in Brazil. Probes also have found undeclared assets in Chile, Brazil, Spain, the U.S. and other countries, mostly in bank accounts and real estate.
The crackdown has not sparked public criticism, except for a few high-profile business executives and politicians refuting claims.
Instead, it is seen as an effort to show the public that the government is working hard to increase tax collections but that the rich are slowing the process, Germano said.
This also helps, he added, to deflect attention away from an investigation into alleged tax irregularities by a hotel operator owned by the family of President Cristina Fernandez de Kirchner that made headlines last week.
This could sour the ruling party’s chances in the October 2015 presidential election, Germano said.
“The election may not be on the minds of the electorate, but in the political world, the campaigning has started,” he said.
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