Argentina can turn the peso into a central bank digital currency (CBDC) to increase tax collection. This is the proposal created by the Productive Inclusion Foundation, as disclosed by the portal iProfesional.
Argentina may create CBDC
Under the proposal, the current Argentine peso would be digitized and the country would have the Digital Argentine Peso (PAD) in its place. The use of CBDC would not be through a digital wallet, but through a card similar to debit cards.
That is, the CBDC would not have a physical format, but purely digital. With this the government would have greater flexibility and freedom to collect taxes from the population. According to the Foundation, the measure could generate between $50,000 and $80 million a year in taxes.
The proposal has already been presented to the Argentine Confederation of Medium Enterprises (CAME) and the Argentine Industrial Union (UIA). There is no forecast of when it will be presented to the Argentine Congress.
The leader of the proposal is Carlos María De los Santos, former director of Novo Banco do Chaco and president of the foundation. De los Santos explained that the initiative is part of a comprehensive proposal that seeks primarily to reduce tax evasion.
On the other hand, CBDC would also serve to inject money into the country’s economy. De los Santos stated that Argentina is currently “paralyzed”, with no currency issuance.
“The PAD will bring with it a greater tax collection from the current evasion, which can be estimated at 30% of GDP, which can be used to repair all the social inequalities left by the current system”, he explained.
In addition, he argued that it is necessary to refinance the credits of the banks’ current portfolios, fixing the payment of capital and interest in the last installment and for the longest possible term. This will make it possible to settle liabilities as long as inflation exceeds 20%.
De los Santos, however, did not provide details of the alleged “paralysis” of currency issuance. After all, Argentina suffers from inflation that has already exceeded 50% in 12 months. With the loss of purchasing power, the Argentine peso is losing more and more value.
The push for CBDCs
As the world becomes more digital, central banks are stepping up their research into creating a CBDC. In some cases, ready-made versions already exist, such as the Bahamas CBDC. Others, such as China’s Digital Yuan, are still advanced in their testing phases.
In most cases, they are designed to be used in the same way as money, to buy and sell goods and services. The backing of each CBDC is given by the central bank of each country, which sets its monetary policy.