MercoPress. South Atlantic News Agency

New tax and banking bill ‘scares’ investors warns Uruguayan business community

Hundreds of towers in Punta del Este mostly belonging to foreign investors

The Uruguayan government announced intention of making banking secret accounts “more flexible” and expanding income tax to overseas holdings and assets have delayed investment decisions and accelerated the sale of real estate in Uruguay by foreigners, particularly Argentines, warned the Uruguayan Chamber of Tourism.

A delegation from the chamber with their president Luis Borsari were invited to the Uruguayan Senate Finance Committee where they expressed their “deep concern” about the “loss of confidence” among foreign investors, following on the Ministry of Economy announcement that it has submitted to Parliament a bill to tax universal income and make the lifting of bank secret accounts “more flexible”.

To this must be added the agreements for exchange of fiscal information which the Uruguayan government is in the process of signing with twelve other countries so as to comply with the Organization for Economic Cooperation and Development and be removed from the so called “grey list” of fiscal havens.

“Anybody in the real estate or construction activities and in contact with foreign investors has received inquiries about the bill and in some cases, shocked at the news have been given instructions to sell”, said Borsari interviewed by the press following the Senate committee meeting.

The most concerned are Argentines who have ploughed hundreds of million of US dollars into real estate and businesses in Uruguay’s main seaside resort Punta del Este and increasingly in Montevideo.

So far the Uruguayan government has said it has no intention of signing a fiscal transparency agreement with Argentina, but given the record of at least twelve countries, in the future “it can’t refuse to such a proposal from Buenos Aires when it comes”.

Borsari said that the additional revenue to be collected with the new fiscal reform is similar to the different taxes paid by the construction of “one or two high-rise towers in Punta del Este” to the national and provincial treasuries and to social security.

“It is totally incomprehensible which Uruguayan is going to benefit from such a bill”, insisted Borsari. He said the initiative was a “strategic error” and called for the bill to be “boxed in a drawer”.

An option is to tax those foreigners who become citizens or residents, suggested Borsari, who recalled President Jose Mujica’s speech to a thousand foreign investors (mainly Argentines and Brazilians) last February when he encouraged them to trust and live in Uruguay because the country has clear and stable rules of the game and promised “there would be no increase in taxes”.

“Our only purpose is to try and avoid a loss of trust, confidence in Uruguay, which the country patiently earned, brick by brick, over decades”, said Borsari.

The Chamber of Commerce and the Association of Private Banks have also expressed before the Senate commission their position contrary to the bill.