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Milei’s Austerity Ravages a Factory Hub at the End of the World
- Thread starter Larry
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Vero
Well-known member
Containing inflation is just one part which Milei has done ok. But unless the economy can start moving then he will be doomed. 10 straight months of job losses and more than 20% of manufactures across the country say they are going to fire more employees over the next 3 months.
Uncle Wong
Well-known member
Is that article correct? Is the informal or black market really half the total employment??
Vince
Well-known member
Yes 100% correct. Some estimates are even higher than that. No one knows the true number but many work under the table.
Uncle Wong
Well-known member
Wow that is staggering! I assume the reasons for this are tax related? Or is there some other reason?
Yep Vince is correct. Probably about 50% to 60% are under the table or at least part of their salary is under the table. This is done to avoid taxes. Some people don't understand how terrible taxes are in Argentina. I've never owned a business in Argentina but plenty of my friends do. They tell me that if you did everything in white and paid every legitimate tax and fee it would be impossible to make money in Argentina. I don't know if that is an exaggeration but it is very bad. That is why many reforms to the tax law are needed.
Companies many times won't hire an employee unless they agree to declare part or all of their salary under the table so everyone can avoid taxes. Of course this needs to be fixed but even Milei has acknowledged that it's impossible to bring all of these informal workers above the table.
Betsy Ross
Well-known member
Mostly tax related. Very high taxes to have employees. And many employees want to be official but it's a catch 22 as many employers won't hire unless they are in black. But even that comes back to bite employers sometimes when employees sue their employees if they are fired. I have several friends that have businesses and only a few do everything in white.
Aussieland
Well-known member
It is not just employees but much of the country operates in black. You will often see businesses that will give you a 10% to 15% discount to pay in cash. Why? Because there are higher taxes than that. They will still come out ahead even giving you that discount.
Taxes are outrageous here. When I bought my apartment here the realtor's fee was 4% but then there was an additional 21% on top of that fee. Same thing for my Escribano on his fee. 21%! And they were all too happy to just have me pay in cash and avoid that tax altogether. Why? Because then they wouldn't have to pay income tax on those fees.
Much of the country is like this. It is also one of the reasons why it is so difficult for it to end it's boom and bust cycles.
Taxes are outrageous here. When I bought my apartment here the realtor's fee was 4% but then there was an additional 21% on top of that fee. Same thing for my Escribano on his fee. 21%! And they were all too happy to just have me pay in cash and avoid that tax altogether. Why? Because then they wouldn't have to pay income tax on those fees.
Much of the country is like this. It is also one of the reasons why it is so difficult for it to end it's boom and bust cycles.
LongIslander
Well-known member
Argentina has horrible taxes. The import taxes are horrific. And even has taxes on exports.
Finance Prof
Well-known member
This in a nutshell describes the problem. Taxes are too high at unreasonable levels. So @Aussieland gave a good example. The same happened when I bought my condo. Both the realtor and lawyer said I could skip the iva tax if I didn't need a receipt. They left it up to me and I also skipped out on paying it. Right or wrong this is what is happening here each day.
Not making any excuses and it is what it is.
I am not sure if it's 50% but probably close to it. The reason why Milei approval ratings are still fairly high is the 50% that are doing things legally in white are tired of supporting the remaining 50% in black and are tired of subsidizing the entire country. On paper it may look like the 50% in black aren't making anything and get subsidies but half the country is having to pay for it. This 50% know the only chance of fixing this is with someone like Milei. Not a perfect President but the only shot this country has at being fixed.
Betsy Ross
Well-known member
Bravo. This is correct. Not saying there isn't a lot of suffering going on because there is. I have a lot of friends here that voted for Milei but they didn't realize how painful this recession would be. They are still supporting him because they know it will take time to turn things around. There is no turning back for many that supported him and want to improve the country. But if they lose their jobs or have to close their companies no doubt they will change their tune.
And @Finance Prof you are correct about taxes being too high. Now some realtors declare some of the income or the Escribanos but only a fraction of it. This isn't going to change overnight.
Billy Goat
Well-known member
Follow the money. Finance Minister Caputo's family members own or control several of these companies in Tierra del Fuego.
Los Caputo y el negocio de Tierra del Fuego | El establishment, en llamas por la protección del Gobierno a los ensambladores de electro
El ministro de Economía blinda a Mirgor -de su primo Nicky Caputo- y al resto de las firmas con 1500 millones de dólares del Estado en excenciones impositivas. La historia y el lobby de los Caputo para proteger al sector mientras se desfinancia a const...
It doesn't make sense the prices they are charging and there is no real market for it. Prices are over 150% to 200% higher than what you would pay in the USA or 100% higher than what you would pay in Chile. Follow the money. If Milei is going to clean house he needs to clean the entire house.
Jeep
Active member
Milei changed the law and did some labor reforms. He is giving people a chance that have their employees in black under the table to regularize them without penalties or fees.
Unfortunately, even if companies are given the chance to regularize their employees most probably won't. Just the mentality here. Many are seeing even if they pay into retirement or pension plan if they are only getting $200 when they are 67 it's not worth it.
This seems unbelievable.
So what incentive do people have to not just getting paid in cash? Many illegals and migrants do that in the USA and just work in cash but seems nuts an entire country would have 50% of the people doing this. How does anything get done? I guess I understand why they say so much cash is outside of the banking system and the country has so many economic problems. What will cause these people to change their behavior?
earlyretirement
Moderator
Some great posts on this thread. It is very true that a large % of employees are working under the table. If not all of it, many companies might pay 50% under the table so that if their true salary is the equivalent of $600 USD they might claim they are making $300 USD. The tax situation is extremely complicated and there are too many taxes.This seems unbelievable.
So what incentive do people have to not just getting paid in cash? Many illegals and migrants do that in the USA and just work in cash but seems nuts an entire country would have 50% of the people doing this. How does anything get done? I guess I understand why they say so much cash is outside of the banking system and the country has so many economic problems. What will cause these people to change their behavior?
It is improving. Not by will but these days AFIP (Argentina IRS) tracks everything. When you deposit money into your bank account, when you spend money on your credit or debit card, when you make purchases on Mercado Libre. Even when you are purchasing airline tickets. They are checking all of those things to see if your income justifies the purchases. So the system is more controlled now. This is part of the reason why so many in Argentina still use cash for many things.
@Jenn so it's a change of behavior by controlling all of these things. But even doing this, it is difficult to change the mindset for the masses and it will take many years. More and more people are doing digital transactions which is great but you can't really go by whatever statistics are given because many cash transactions are never reported at all.
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