Asier Hernando Malax-Echevarria

Argentina introduces a Wealth Tax (aka ‘the Oxfam Tax’). Could this be the start of something big?

Asier Hernando Malax-Echevarria discusses what looks like an important advocacy win

The Argentine Senate has just passed the ‘Solidarity and Extraordinary Contribution of Great Fortunes’ law, a one-off tax intended to help cover the costs of the COVID19 pandemic in a country where it has so far killed 40,000 people. The tax will pay for medical supplies, assist small and medium enterprises, support student scholarships, social developments and natural gas projects.

The tax will be levied on Argentina’s 12,000 richest people, just 0.02% of the population, who have declared assets of more than US$2.5 million.  will be collected through a one-time charge of 2-5.25% on individual assets that the Argentine government expects to raise some $3.5bn.

Many countries (including the UK) are discussing it, but Argentina is the first to actually do something concrete. As important as what the money collected can provide is that the new tax sows a seed/establishes an important precedent.

As prestigious economists such as Piketty, Stiglitz or Zucman have been pointing out for some time: “If the richest do not end up bearing a proportional part of the economic burden of the pandemic, neither the national collection of taxes such as income tax nor even the international coordination of business taxation will be sufficient.’

These economists are asking for a lot more than the Senate of Argentina, demanding radically higher Covid-related taxes on wealth at a time of calamity and collective losses. 

The history books show similar events. They remind us that at a time when the need is at its greatest, windfall taxes on the most profitable companies have been adopted in countries like the United States, Japan, Germany and  France after World War II or Ireland with the financial crisis of 2008. Tax systems have often been more progressive in times of war. The US raised top income tax  to a peak of 80% during World War I and 95% in World War II.

It should have been done before, not just in Argentina but across Latin America, because it is a region of obscene contrasts. There is extreme wealth in all its countries, yet the continent invests just one third of EU levels in health per inhabitant.

Such a low capacity to raise funds has contributed to Latin America’s disproportionate death toll – the region has accounted for 30% of deaths from COVID19 worldwide, even though it has just 8% of the world’s population.

Oxfam, in its report “Who Pays the Bill?,” points out that the wealth of the region’s super-millionaires grew by 17% in the 16 weeks from mid-March: US$ 48.2 billion. That is equivalent to 38% of the total of the stimulus packages that all the governments have activated and to nine times the intervention of the International Monetary Fund (IMF).

The region minted on average one new billionaire every two weeks since March while millions of citizens have been left battling sickness, extreme economic hardships and struggling to put food on the table during lockdowns, with hospitals on the verge of collapse.

Latin American governments are massively under-taxing the wealthiest individuals and corporations, which is undermining their fight against the coronavirus and poverty and inequality. Oxfam estimates that Latin America will lose $113.4 billion in tax revenue this year, equivalent to 59 percent of spending on public health in the region. (basis of calculation (in Spanish) here)

We cannot fall into the mistakes of the past, when structural adjustment plans or responses to multiple crises resulted in disinvestment in social policies, low levels of social protection and even in democratic setbacks. The outbreaks of social discontent that showed their most bitter face in the second half of last year, just before the pandemic broke, should be a warning sign. Seeking a return to normality is not enough; normality was already the problem in a region plunged into a deep crisis of inequality.

Argentina could be just the beginning: Bolivia has just approved a wealth tax too, and Chile is Debating following suit.

Some media in Argentina are calling the new tax the “Oxfam Wealth Tax” because of the influence they claim we have had on the arguments for its approval. We were even name-checked in the bill sent to the Argentine Senate. We’d prefer to call it the “Covid Solidarity Tax’ – promoting a solidarity among Argentines that we hope will continue to inspire other countries around the world.

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Comments

3 Responses to “Argentina introduces a Wealth Tax (aka ‘the Oxfam Tax’). Could this be the start of something big?”
  1. Maru Mormina

    What this article omits to mention is that this tax is being collected in a country plagued by corruption, mismanagement, political infighting and a million of other governance issues. It seems to me rather deluded to think that this Covid-solidarity tax on its own is going to solve Argentina’s problems. I am not against the principle of a wealth tax (in fact, it should be applied everywhere), but frankly I have serious doubts that whatever money is raised will reach the intended beneficiaries. Furthermore, I don’t think the question should be framed as “who pays the bill” after Covid-19. It is not just a question of economics but fundamentally an issue of democratic deficit, which was there before but has been exacerbated by this pandemic. Until the democratic institutions of the country are strengthened, Argentina will not emerge from its perennial state of crisis (a word that has been in the mouth of every Argentinian for decades, not just since Covid-19). Just to give an example: since March, Argentinian children have not had any meaningful education. Some schools have offered online provision, which of course excluded swathes of poorer kids. Whilst casinos are open, schools remain firmly closed. One wonders what the rationale for this is. The answer is the powerful unions, who do not wish to return to work. A government consumed by its own internal petty fights and no real accountability is leaving millions of parents powerless as their children (an entire generation) are set back educationally. Those who can pay private tuition will try to mitigate the damage but I do not need to spell here what this means for fighting the obscene levels of inequality that characterise the region, as this article rightly points out.
    So, Oxfam can ask who pays the bill and advocate for more taxes to be raised but it should at the same ask: where is the money going and what problems is it going to solve?

  2. cecilia

    Agree completely with Maru, also, consider that latin american countries are compared with countries that endured enormous damages during the wars, while the earlier are in war with their own government officials that go from bad to worse. Also, consider that people that obtain some (hard worked) wealth, are resisted, criticized and expelled from the country while the corrupted officials and citizens are admired and protected. Is a weird country, need to know it well to talk about it. Powerful unions as the teachersone, resist to teach, don’t care about children at all, they just want to stay home and get the salary. Nobody cares about the extremely poor, the uneducated, the only goal of the peronist government is to tend to these people and keep them happy with crumbs and wasted food to obtain votes. Is funny that the government officials are RICH COMMUNIST that don’t intend to share their (robbed) wealth.

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