The new president of Argentina, Javier Milei, has removed the crypto tax plan from the Omnibus bill.
The Argentine news website iPROup reports this with an article published a few days ago.
Milei’s idea was to have a new tax regime for cryptocurrencies approved by parliament within the Omnibus bill. The removal from the Omnibus law effectively postpones the decision in this regard.
The new crypto taxes in Argentina
Milei’s proposal was to create a tax exemption for cryptocurrencies.
In order to achieve this, he had inserted a clause for the regularization of digital assets in the original draft of the Omnibus bill, in exchange for the payment of a one-time tax on previously undeclared assets.
This clause provided for allowing Argentine citizens to declare ownership of previously undeclared assets, such as cryptocurrencies, by paying a 15% tax only on the value exceeding a threshold of $100,000.
In fact, this created a total tax exemption for those who declared the possession of assets with a total value of less than $100,000, and a partial exemption for higher amounts.
So in Argentina the current tax regime will continue to apply, which does not impose taxation on the mere possession of cryptocurrencies, while it does impose the usual transaction tax on any capital gains generated from sales.
However, the fact that the clause regarding cryptocurrencies has been removed from the Omnibus law does not mean that it has been completely abandoned, but only that they could try to have it approved in another way.
The problem with the parliament
Javier Milei was elected in November and took office in December.
Its biggest problem is that it does not have a majority in parliament.
Milei is an independent who does not belong to any major party, but to a coalition that has only 38 deputies and 8 senators out of a total of over 320.
In the Argentine Chamber of Deputies, the relative majority is held by the opposition party Unión por la Patria (UP) with 103 seats. However, out of 257 seats, the government can rely on 114 supporters, including members of the governing parties and external support.
Since the absolute majority would be 129 seats, Milei is effectively governing without a majority in parliament.
Note that the parliament was elected on October 22nd, the day when Milei received less than 30% of the votes in the first round. So, the candidate who received the most votes among the presidential candidates was Sergio Massa, the candidate of UP.
So in fact, the October elections were won by UP, while the November elections (the second round of the presidential elections) were won by Milei. This greatly complicates the ability of the new president to govern.
The Omnibus Law
The Omnibus bill, which included the clause on cryptocurrencies, is a massive attempt at reform all at once that the Argentine parliament does not particularly like.
In fact, Milei is forced to compromise in order to get it approved, to the point of having to delete the passages on which there is less consensus.
The Minister of the Interior Guillermo Francos has stated that the entire section of the bill concerning fiscal issues has been reduced, and the crypto clause has effectively been postponed. This suggests that in the near future, the matter will return to the attention of the government and parliament.
The problem is that the Omnibus bill, as it is, is causing many delays in its approval, as it is full of points that parliament is contesting. Not having a real majority in parliament, Milei is forced to negotiate.
According to Francos, the elimination of the tax section was crucial to speed up the approval of the law.
Crypto taxation in Argentina
In Argentina, the only crypto tax is the one on any capital gains resulting from sales.
Individuals residing in Argentina must pay a tax on any income derived from the sale of cryptocurrencies at a rate of 15%, while corporate profits, for example, are taxed at a progressive rate ranging from 25% to 35%, plus an additional 7% for any dividend distribution.
Therefore, it is a taxation lower than that of many other countries, among those that tax crypto capital gains, but still in line with the rest of the world.
The issue raised by Milei instead concerns the emergence of undeclared profits in the past, a sort of amnesty that would have the advantage of not making those who are under $100,000 pay.
The future evolution of crypto taxes in Argentina
It is not yet known whether Milei will really favor cryptocurrencies, or Bitcoin, in Argentina.
What is known is that for now he has abandoned the plan to close the Argentine central bank and replace the peso with the dollar.
However, he reiterated that it is only a temporary abandonment, certainly also due to the fact that he does not have a majority in parliament supporting him.
In other words, his victory at the end of 2023 was only partial, because even though he won in the second round and was elected president, in the first round the UP had performed better than him. And so he finds himself having to govern with a parliamentary majority that either does not support him or even wants to oppose him.
In such a scenario, it seems that it will be particularly difficult for him to govern.