Experiences in Chile and Argentina
Amnesty in Chile was not a presidential initiative but the Senate’s fiscal reform, inserted in Article 24, added to Law 20,780 of 29 September 2014, to regulate declaration of goods and money abroad. Chile faithfully abided by the recommendations issued by OECD: “Offshore Voluntary Disclosure Comparative Analysis, Guidance and Policy Advice”.
One of the main recommendations taken by Chile’s Internal Tax Service (SII) was to apply mechanisms safeguarding norms to prevent asset laundering and terrorism and keep the amnesty program from being used to declare goods owned by third parties by using figureheads. For this purpose, guidelines from OECD, FATF and GAFI were incorporated.
One of the main measures was to establish that only individuals or corporate bodies that were residents or legally domiciled in Chile prior to 1st January 2014 could qualify for amnesty, in order to keep other taxpayers from going to Chile only to apply for the special system.
The program in Chile was clearly delimited as an extraordinary, temporary and voluntary mechanism, by applying a very special, one-time, substitute tax. In my opinion, the Resolution issued by the Chilean Tax Authority (Circular to Interpret Article 24) was fundamental to better regulate and interpret application and implementation of the amnesty.
Declaration by the taxpayer is voluntary and acknowledges their ownership of the goods, and the fact that they have not fully performed their tax declarations in a timely manner, which is the essence of the program, in order to regularize their ownership and then submit to the fiscal laws governing that property.
The system made it possible to apply a special, one-time tax instead of any other tax that might be levied on those goods or assets. Being “one-time” means that this cannot be applied to any other tax on those same goods or assets, because it is extraordinary, under exceptional circumstances.
The system was designed as transitory, in effect for only one year, from 1st January through 31 December 2015. The voluntary declaration means that the taxpayer authorizes the SII to require banks and other institutions to accurately and truthfully confirm the data declared. Further, declarations of other assets or goods must be accompanied by an inventory and description thereof, indicating their origin, nature, and amount, indicating who appears as the titular owner, even when not directly in the name of the taxpayer, and also granting the SII authorization to verify all that information.
Goods that could be declared included shares or other rights representing capital, but only when nominative, in the taxpayer’s name, therefore excluding shares made out to the bearer; and financial assets which the taxpayer can prove ownership of, whether directly or through corporate bodies, trusts, fiduciary agents, or foundations. The goods declared could be located in Chile or abroad and the declarant had to demonstrate conclusively direct or direct ownership thereof, as of prior to 1st January 2014.
It was prohibited to declare goods that were in high-risk jurisdictions or not cooperating with control measures to prevent asset laundering and financing of terrorism according to GAFI lists.
Importantly, Chile preferred not to oblige its taxpayers to repatriate their capital; nevertheless, they were allowed to enter goods or revenues when relevant, by establishing the respective mechanisms.
Chilean Law stated that goods must be declared at market value, establishing several rules for valuation, including through an independent valuation report if necessary. If a market value is not credited, the SII has the power to apply an adequate appraisal, using regulated mechanisms, in coordination with the taxpayer.
The rate adopted in Chile for this single tax in substitution for all other taxes was 8%, and was payable on the basis of a market valuation within five days after the declaration.
Once the declaration was presented, the Chilean Authority had 12 months’ time to inspect and review these declarations, after which this judgmental power expired, because the law did not allow any extensions after this deadline.
Those persons who had been convicted, prosecuted, sued or subjected to administrative actions for laundering assets, fiscal crimes, financial or other crimes, were not allowed to apply for this amnesty.
Absolute confidentiality was established for officials handling and administering these declarations based on the amnesty program.
The Chilean SII website stated (in early 2015): “A total of 7,832 declarations were received by 31 December by the Internal Tax Service from taxpayers applying for the voluntary, extraordinary system for declaring goods or revenues that were abroad, pursuant to Transitory Article 24 of the Tax Reform. The taxes determined and entered into the Treasury for this item totaled US$1.502 billion.”
ARGENTINA
Meanwhile, in Argentina, on 4 April 2017, after completing the same program to disclose property ownership, the Minister of Finance, Nicolás DuoNeb, and the head of the Federal Public Income Administration (AFIP), Alberto Abad, presented the final outcomes of the Fiscal Disclosure Regime, stating that “the final figure of declared assets totaled 116.8 billion dollars, of which 93.3 billion are assets abroad”.
I understand that this figure is a world record, surpassing Italy’s previously record of USD102.0 billion.
Dijon and Abad added that ““the disclosed assets will result in tax collection of 148.6 billion pesos,” approximately USD 1.0 billion… “96% are owned by individuals and 4% by corporate bodies” and “This amount collected will be contributed to the National Social Security Administration (ANSES) since we are returning to retirees what the country has owed them for decades,” they said.
These figures in the Macri Government contrast radically with the results obtained in two “white-listing or disclosure actions” done by Cristina Fernández de Kirchner in 2009, which reached only USD 4.9 billion and in 2013-2015, which obtained only USD 2.6 billion in declared assets.
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