In Argentina, tax evasion is a way of living, everyone there, young or old, rich or poor, looks for a way to avoid taxes, since taxes coupled with inflation make life very expensive, no matter your income ¯\_(ツ)_/¯ .
The best way to live in Argentina is to be a ghost. No bank accounts, nothing declared, everything you own should be on someone else's name, earning usd in a foreign account and you should live on cash (converting usd to pesos as needed).
But don't forget that no matter the amount of taxes collected, politicians will find a way to spend more, so there will always be a deficit and more money will always have to be printed and whoever wants to reduce the deficit will be accused of "tightening" (ajustar) the Argentine people.
> But don't forget that no matter the amount of taxes collected, politicians will find a way to spend more
That’s just not true, there are plenty of states that run surpluses.
> Argentina leads a ranking of world tax pressure
I didn’t say their tax policy was good, only that it’s difficult to address deficits when you can’t reliably collect taxes.
It’s all related. The government doesn’t collect sufficient tax revenue => they raise taxes => people evade taxes => the government raises taxes more.
Such backwards tax policy is a sign that those who can evade taxes are (usually mostly the elites, but to an extent everyone does it), and those who can’t are footing the whole bill.
That source does not show all the accounts (says in the details popup).
If you use the information from the argentine tax collection agency statistics page [0] and divide that result by the GDP you get a wildly different result (e.g. 23% vs 10% for 2019 using the official data vs your source)
And either way, the data you show does not support your claim, they are not very correlated. You have a mostly flat tax collection rate on an economy with a yearly rising inflation rate since 2002.
Perhaps it’s the pension system in Argentina that is causing the whole deficit? I’m on mobile so it’s currently a big more challenging to do proper research.
Looks like it is. This site from the economic ministry says the "Servicios Sociales" (social services), is around 72% of all expenses (with social security as the highest spender) [0]
There is no way to succinctly describe all the myriad differences between the two countries that make this comparison unhelpful for understanding Argentinian inflation.
Indeed I am using a shorthand her to summarize the issues as well.
My response is meant to highlight the fact that the situation is not nearly as “simple” as a government that runs fiscal deficits.
I don’t know every detail about Argentina, but broad strokes, when you have a failing political class that is unable to effectively levy taxes and maintain international credit worthiness, you are going to have financial trouble. People love to blame spending and get moralistic about it but that’s typically not the primary issue.
Ehh, in this case it is, they are spending much more than we earn, and to cover that they used to take debt. Now no one lends to Argentina at a nice rate, so they emit internal debt by printing a ton of ARS to finance themselves, thus generating inflation.
If they stop printing, they have to stop spending as well as cutting spending, leading to a raise in interest rates and a quick economic crash instead of the slow burn situation as of now.
The current government is just trying to hold on until next elections, so when the economy explodes they can blame the next government for it.
It’s not that what you’ve written here is incorrect, but that this doesn’t say anything about what the remedy should be.
Simply letting the economy crash isn’t a good solution as it doesn’t address the fundamental reforms that are needed and doesn’t get you any closer to solving the structural issues. All it does is create unnecessary pain for people.
Again, if an entire society is engaging in rampant tax evasion, that is going to need to be addressed in order to turn things around.
Those fundamental reforms - which aren't only necessary in Argentina but basically in every major country, apart from maybe China - would be to:
Reverse the ever more effective mechanisms big corporations have come up with in almost every jurisdiction to siphon an ever increasing proportion of all revenues from the total of economic activity and bypass taxation, making only maybe the richest ten percent (who are the shareholders) richer.
Governments can borrow as much money as they want and central banks can allow banks to create as much money as they want to feed it into the economy to try in a futile way to keep the engine going .. as long as this trickling up of revenue is happening to the extent it is right now, the whole economic/monetary/social system is instable and heading towards either collapse or drastic political reform.
Unfortunately apart from some minor patches (plans to actually tax big players in the EU) I don't see much evidence for elected politicians trying to improve the situation.
That's something MMT gets right. Public deficits = net private savings. So as long as there are people willing to save in USD (and not only US residents, people all over the world save in USD, including Argentinians), you can have a persistent deficit. In case the 7% becomes persistent inflation, make sure you have a plan B, you don't want to lose reserve currency status.
MMT gets a lot of things right, most of its critics seem to simply have not actually studied it at all, or have been informed primarily by sensationalist contrary takes.
Because everyone in the world likes and uses USD.
In Argentina no one wants Argentinian pesos, people outside argentina like them even less, however you can use USD all over the world, so yeah, it's not comparable.
> Pesos aren’t valuable because pesos aren’t valuable.
Welcome to fiat currencies, where a big incidence on the value of the currency is what people feel about it!
Basically, it's offer and demand. The offer of pesos is huge vs the actual demand, so they lose value.
That's also the reason for the inflation of the USD last year, the us government likes to print non stop.
The US prints money because it can, Argentina prints money because it has to. (The monetary course taken by the fed in 2020 has proven quite successful, we’re at full employment with only moderate inflation as a price, which will be addressed in coming year)
The best way to live in Argentina is to be a ghost. No bank accounts, nothing declared, everything you own should be on someone else's name, earning usd in a foreign account and you should live on cash (converting usd to pesos as needed).