According to a research by private banks in Argentina, the interest rate accounts for the payment of at least a dozen local, state, and federal taxes.

The banks maintain that one of the obstacles to the extension of credit in Argentina is the taxation of the financial intermediation industry. The other is, of course, inflation and the Argentines’ disdain for the peso as a store of value.

In a recent technical report, Adeba, the organization that brings together private banks and national capital, makes this claim.

They used the example of a personal loan or mortgage to illustrate what taxes mean.

According to Adeba, who cites a survey by the Mediterranean Foundation, taxes account for an average of 44% (although they can reach 50%) of the cost of borrowing, while the interest rate minus taxes accounts for the remaining 56% or 50%.

In other words, when taking out a loan, each installment has a tax component, which means that over half of what the client pays goes to the nation, province, or municipality’s collecting agencies.

Companies and individuals that use the financial system are exposed to a tax burden that is unparalleled in the region on a national, provincial, and municipal level, claims Adeba. He also emphasizes that the majority of taxes are “bad taxes” that lead to economic activity distortions and a “cascade effect”.

Taxes on bank credits and debits, also known as check taxes, taxes on gross income for credit operations, income taxes for services rendered, income taxes on liquidity instruments of the BCRA, tax on seals on cards and other financial operations, municipal rates for branches, and municipal rates for ATMs and self-service terminals stand out among the taxes that have an impact on financial users.

A bigger tax burden is actually created by withholdings, perceptions of VAT, earnings, and gross income on payment operations, in addition to actual taxes, which deters people from using financial services.

In reality, and despite the widely publicized initiatives to ingratiate people with the financial system, what is being accomplished through the so-called “financial inclusion” is something else. This past Saturday, Clarion revealed that 3.7 million credit cards had been canceled in the previous four years, representing an 18% decline in the number of “plastics” that were really in use in 2018.

Adeba maintains that Argentina has the lowest level of bank access in the region based on the number of bank loans and deposits made to the private sector relative to its GDP (GDP). In our nation, bank loans to the private sector account for 8% of GDP, compared to an average of roughly 50% for the area.

Low levels of bank access result in fewer opportunities for businesses and individuals to borrow money, which in turn reduces societal capacity for investment and consumption, which in turn results in lower rates of economic growth and employment.

“The significant tax burden on consumers of financial services is partly responsible for the low level of bank access in the last 20 years. The report continues, “The high tax burden and the declining value of the currency are mostly to blame for the low level of banking in our nation.

The Fundación Mediterránea analysis also reveals that the tax burden has increased significantly over the past ten years. As a result, the average tax rate on gross income in the banking industry increased from 3.8% in 2008 to 8% in 2022. Since the tax is imposed (in practically all provinces) on the nominal rate of active operations rather than the spread, inflation has recently increased the relative weight of IIBB in addition to the rate increase (difference between active and passive rate).

The tax on gross income is gradually being applied to more people. The Autonomous City of Buenos Aires extended the taxes on the IIBB to the interest earned by the monetary regulation instruments (Leliqs) that the banks in 2021 to make up for the removal of a portion of the co-participation at the hands of the Province of Buenos Aires, increasing the weight of said tax on financial activity.

the Mendoza province By raising the IIBB in 2023, it will also add to the tax burden because it will charge banks in that province an interest rate of 7% on whatever profits they make from Leliq investments.

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