BUENOS AIRES: Argentina’s Senate passed a tax on about 12,000 of the country’s richest people on Friday, to pay for coronavirus measures including medical supplies and relief for the poor and small businesses.

In a session streamed live on YouTube, and after a long and polarising debate, the so-called solidarity contribution was signed into law with 42 votes in favour and 26 against, as the pro-government alliance flexed its majority.

The government of President Alberto Fernandez hopes to raise 300 billion pesos ($3.75 billion) with the one-off levy, which earlier passed the Chamber of Deputies with 133 for votes to 115 against.

Argentina’s 44 million population has been badly hit by the coronavirus, with more than 1.4 million cases and over 39,500 deaths, according to figures from Johns Hopkins University.

The pandemic has exacerbated already high unemployment and poverty rates in a country which has been in recession since 2018.

Under the scheme — also dubbed the “millionaire’s tax” — people with declared assets greater than 200 million pesos will pay a progressive rate of up to 3.5 percent on wealth in Argentina and up to 5.25 percent on wealth outside the country.

Of the proceeds, 20 percent will go to medical supplies for the pandemic, another 20 percent to small and medium-sized businesses, 15 percent to social developments, 20 percent to student scholarships and 25 percent to natural gas ventures.

Director of the tax agency Mercedes Marc del Pont said it will affect almost 12,000 taxpayers.

“The tax reaches 0.8 percent of total taxpayers,” said one of the authors of the project, legislator Carlos Heller.

“Forty-two percent have dollarised assets, of which 92 percent is located abroad.” He said the plan was “far from taxing productive activity.” On the opposite side, Daniel Pelegrina, president of the powerful Argentine Rural Society (SRA), warned that Heller “wants to present it as a contribution of the richest, but we know what happens with all those unique taxes, they stay forever.” The neoliberal Juntos por el Cambio coalition, of former president Mauricio Macri, said it was a “confiscatory” measure.“The #AporteSolidario is extraordinary because the circumstances are extraordinary,” said ruling party Senator Anabel Fernandez Sagasti on Twitter.

“We must find points of connection between those who have the most to contribute and those who are in need.”

Proceeds of the tax will be used to buy equipment and supplies to fight Covid-19, fund assistance to small and medium-sized companies, support poor neighborhoods and to help develop the domestic natural gas sector.

The law, spearheaded by the ruling Peronist coalition of President Alberto Fernandez, has received criticism from the more conservative opposition.

Argentina, the third-largest economy in Latin America, is heading into its third year of recession, with high inflation and a sharp increase in poverty.

Published in Dawn, December 6th, 2020