Key Takeaways
- Argentina’s government has introduced the “Principle of Fiscal Innocence” law, a sweeping reform aiming to liberalize the tax regime and encourage the formalization of undeclared wealth.
- The proposed legislation drastically raises thresholds for tax evasion crimes and shortens statutes of limitations, while offering new mechanisms for taxpayers to regularize past financial irregularities.
- A new simplified income regime aims to “shield” holders of undeclared “mattress dollars,” providing legal certainty and access to credit for those who formalize their assets, with the goal of boosting state revenue.
In a significant policy shift aimed at fostering economic formalization and boosting state revenues, the Argentine government has unveiled its “Principle of Fiscal Innocence” law. Presented by Juan Pazo, head of the National Tax and Customs Agency (ARCA), and Deputy José Luis Espert, a key figure in the ruling La Libertad Avanza (LLA) coalition, the initiative seeks to overhaul Argentina’s tax paradigm from a “persecutory” to a “revenue-generating” system.
The core objective is to provide a legal framework for Argentines to formalize their undeclared assets, particularly the significant amounts of “dollars del colchón” (mattress dollars) held outside the official financial system. Espert emphasized this goal, stating, “We want to shield the good citizen. It’s not Argentines who are at fault with the State, but the State with its citizens.” He urged lawmakers to support the bill, framing it as a choice between “letting Argentines be free and normalize their patrimonial situation” or “condemning them to hide their well-earned savings.”
The proposed legislation introduces a two-pronged approach. The first phase focuses on modifying the general tax regime, primarily by redefining what constitutes a criminal tax offense. Under the new rules, the thresholds for simple tax evasion would increase dramatically from ARS 1.5 million to ARS 100 million, while aggravated evasion would jump from ARS 15 million to ARS 1 billion. This adjustment, officials argue, will allow for a “rational utilization of resources for fiscalization,” significantly reducing the current backlog of minor tax evasion cases from an estimated 6,652 to just 198. While these thresholds won’t be indexed to inflation in this bill, a broader comprehensive tax reform is expected to address this in the future.
To further encourage compliance, the bill establishes a pre-judicial instance for certain offenses. If an “improper payment” is detected, ARCA will not immediately file a criminal complaint. Instead, taxpayers will be given a one-time opportunity to settle the debt plus interest. Should a criminal complaint already be filed, the new framework allows for the extinguishing of the penal action by paying the outstanding debt, interests, and an additional 50% penalty within 30 business days of notification. This aims to streamline the process and incentivize prompt payment, moving away from lengthy judicial procedures that often cost more in legal fees than the initial debt.
Penalties for minor tax infractions, such as late submission of declarations, will also see a substantial increase. The fine, which had remained at ARS 200 since 2003, will be updated to ARS 220,000, adjusted by the Consumer Price Index. Additionally, the statute of limitations for tax obligations will be reduced from five years to three years for taxpayers enrolled in the new simplified income regime who file declarations on time. For social security and health contributions, the period will shorten from ten to five years. The bill also clarifies the definition of “significant discrepancies” that would prevent these shorter prescription periods, such as differences exceeding 15% in declarations or the use of fraudulent invoices.
The second, and perhaps most impactful, phase of the reform centers on the new simplified income regime, which came into effect on June 1st. Designed for Argentine residents (excluding large taxpayers and non-residents), this regime targets individuals and undivided estates with annual incomes up to ARS 1 billion and total assets up to ARS 10 billion. Its primary incentive is a “fiscal plug” or “legal lock”: once enrolled, the ARCA will not scrutinize the historical variation of their assets or consumption patterns, effectively shielding previously undeclared “mattress dollars.” This aims to formalize an estimated 5 million informal workers and monotributistas, granting them legal certainty and, crucially, improved access to formal credit. While the regime doesn’t reduce tax rates, the government believes the legal protection and economic integration will be powerful motivators. Upon adherence, the system calculates the taxpayer’s payment, and payment generates a “liberatory effect” on past undisclosed assets. Any new assets declared in subsequent periods will be subject to Personal Assets tax. ARCA’s oversight for these individuals will be limited to their *last* submitted declaration.
Despite the government’s optimistic outlook, the bill is expected to face significant hurdles in Congress, where the ruling coalition lacks a majority. This echoes recent legislative defeats, such as the pension reform, highlighting the political challenges inherent in passing such transformative economic legislation.
Read More:
https://www.lanacion.com.ar/economia/todos-los-detalles-bajan-penas-y-buscan-blindar-a-quienes-quieran-usar-sus-dolares-del-colchon-nid05062025/
https://www.clarin.com/economia/punto-punto-claves-proyecto-principio-inocencia-fiscal-cubrir-ahorristas_0_G45i59CMkm.html