Bolivian Forex Tax Draws Fire

by Mike Godfrey, Tax-News.com, Washington

29 August 2012

The Bolivian government is expected to soon introduce a new tax on dollar transactions, IVME, which will be in place temporarily for 36 months to encourage the use of the Bolivian currency, the Boliviano.

The tax will be levied on the sale of dollars by foreign exchange houses and banks, at a rate of 0.7%. IVME is projected to generate around USD20m towards government projects. The Central Bank of Bolivia will be exempt from the tax.

Concerns have been raised that the levy will boost money laundering activity, and 80-90% of the nation's foreign exchange businesses are said to be at risk as the net currency spread between the dollar and the Boliviano is set to diminish due to the present trading ceiling that restricts depreciation in the value of the Bolivinio past 6.96 Bolivianos to the Dollar.

Dollar transactions worth around BOB575m were carried out in 2011, with profits of BOB83m for the foreign exchange industry. Industry profits under IVME are expected to fall to BOB49m.

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