ARGENTINA Country Profile

Tax Administration

Individual Corruption

The Government of Argentina struggles with high levels of tax evasion among its citizens, which inhibits the government from fully benefiting from a growing private tax base. According to the Bertelsmann Foundation 2008, individual tax evasion is driven by the public's mistrust of the government, which is again fuelled by the low effectiveness of public services and the after-effects of the corralito, the set of strict economic measures taken at the end of 2001, in which bank accounts were almost completely frozen and withdrawal of USD was forbidden.

Business Corruption

Companies report that they experience corruption in tax collection, where they face frequent interaction with tax officials. According to the World Bank & IFC Enterprise Surveys 2006, companies have more meetings with tax officials in Argentina than in most countries in the South American region, and some companies report that they expect to give gifts to tax officials in connection with these meetings. However, according to the World Bank & IFC Doing Business 2010, the number of annual corporate tax payments have fallen considerately between 2007 and 2009.

According to the US Department of State 2009, national taxation rules treat domestic and foreign firms equally; however, tax authorities do scrutinise tax declarations of foreign companies operating in Argentina with the intent of of curbing the use of offshore companies to shelter profits and assets declaration.

Political Corruption

Tax evasion among politicians and people with political connections is widespread. In 2005, nearly 250,000 Argentineans were caught using credit cards of foreign banks in violation of credit laws. These purchases were not registered in Argentina, but went directly to the foreign banks, depriving the state of Argentina of considerable amounts in taxes on consumption. According to Global Integrity 2007, several prominent politicians were among the perpetrators.

In 2007, former Defence Minister Nilda Garre was questioned over a possible tax evasion case in relation to a government weapons deal. There were allegations that the weapons were undervalued to avoid customs taxes.The investigation was, however, cancelled.

Frequency

The World Bank & IFC: Doing Business 2010:
- A medium-size company operating in Argentina must make 9 payments to tax authorities every year, taking 560 hours on average at a total tax rate of 108% of profits.

Transparency International: Global Corruption Barometer 2009:
- 1% of households who had contact with tax revenue services throughout 2008 report to have paid a bribe.

Transparency International: Global Corruption Barometer 2007:
- Tax revenue scores 3.2 on a 5-point scale in the public opinion survey (1 being 'not at all corrupt' and 5 'extremely corrupt').

The World Bank & IFC: Enterprise Surveys 2006:
- Approximately 49% of companies report that a typical company declares less than 100% of its sales for tax purposes.

- Nearly 44% of companies identify tax administration as a major constraint for doing business.

- A company spends on average almost 5 days every year in meeting with tax officials.

- Almost 4% of companies report that they expect to give gifts in meeting with tax inspectors.