Increased Luxury Goods Tax Made Law

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Luxury goods tax increases (photo courtesy of Wikipedia)

Luxury items to be taxed at a higher rate (photo courtesy of Wikipedia)

The senate has confirmed the increase in the tax on luxury items such as expensive cars, properties and other high-value items. Some goods will now be taxed at a rate of 50%.

The president of the Budget and Property Commission, Anibal Fernandez, commented on the change. He said its purpose is not ”collection of funds, rather it seeks equity and distribution of income”.

There was already a tax rate of 10% on luxury goods, but the change, which modifies internal tax law 24.674, will see the rate rise by different amounts depending on the value of the item.

Products valued at above $170,000 – or $210,000 for high-value cars and other vehicles – will be affected by the change. Goods between this price range will be taxed at 30% and those valued above $210,000 will be taxed at 50%.

Aircrafts used for sport or recreation will be taxed at 50% if they are valued at above $170,000. Motorbikes will be taxed at 50% if they cost between $22,000 and $40,000.

The change was voted in with 39 votes in favour of it, 18 votes against it and five abstentions. The votes in favour were from the ruling party the Frente para la Victoria and their allies and the votes against were from the opposition.

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One Response to “Increased Luxury Goods Tax Made Law”

  1. Werner Almesberger says:

    Yeah right, as if this was only about absurd contraptions like the car shown in the picture.

    One issue is that the threshold is low enough to affect most cars, even quite reasonable ones. This wouldn’t be so much of a problem if it was a progressive tax, but it isn’t. So it effectively creates a two class system with an inevitable large gap between the very cheap and the higher priced models.

    I’m not sure what this will do to the car market. It could be that companies will simply price their “popular” models right below the limit. If they have a huge margin already, this will be easy. If they don’t, something will have to give. It may be durability, though Tyler Durden would have no qualms saving a few pesos on crashworthiness as well.

    If they maintain present prices, sales will drop. So all the money the government earns with this may go right into pacifying the newly unemployed. Well, as Filmus famously put it, the ruling party is proud of those who don’t work [1] (and neither study he said, former Minister of Education).

    Of course, the Argentine car industry had some fairly fat years lately, with people “investing” into cars (because the government closed most other forms of savings). This means that the streets are full of cars that nobody thought were necessary before.

    But I’m not so much worried about cars but about what else may now be considered “luxury goods”. Also, if the classification depends on the price, would the government see fit to adapt these values – which in many cases may appear to be reasonable at the moment – to real inflation ? It seems like a poorly disguised plan to slap an 50% extra tax (in addition to all the other taxes and fees, VAT, et cetera) on – in the long run – virtually anything.

    [1] http://www.cronista.com/economiapolitica/Sorprendio-Filmus-al-decir-que-es-un-avance-el-aumento-de-jovenes-ni-ni-20131002-0024.html

    - Werner

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