Tax Evasion Lies At The Heart Of Argentina's Problems, Say Experts

by Robert Lee, Tax-News.com, London

03 January 2002

According to two leading tax experts, in order to pull itself out of the economic crisis in which it is currently mired, the Argentinian government will need to address deep-seated problems within its taxation system.

Speaking to the International Herald Tribune on Wednesday, Roger Scher, leading Sovereign Analyst with credit-rating agency Fitch IBCA, argued that noncompliance with the country's tax laws on the part of both individuals and companies had contributed greatly to the current crisis.

He told the IHT that Argentina would need to ready itself to take advantage of the sporadic economic booms which affect the country, revealing that: 'Argentina, from 1991 to 1997, was one of the fastest-growing countries in the world', but that the government ran a deficit for every one of those years.

The ex-Chief of the Argentinian tax agency, Carlos Silviani, agreed that tax evasion and noncompliance had been rife in the country for years. 'The taxpayers were not afraid because they knew they had a way out,' he confessed. Mr Silviani, who headed the tax department between 1996 and 2000, pointed to delays in enforcement as a significant factor encouraging Argentinians to evade taxes.

Both men told the International Herald Tribune that since last spring, when the first warning bells began to sound for the Argentinian economy, tax evasion has worsened. Mr Silviani stated that in his opinion, the government had exacerbated the situation with the introduction of a complicated new tax system, and continued to do so until the storm broke recently.

'They have made a mess,' he argued. 'Even in the last month, they really destroyed the tax system. The most sophisticated tax administration in the world wouldn't administer that system.'

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