Bolivia bets on wealth tax to boost post-pandemic recovery

. Jan 31, 2021
Following in the footsteps of Argentina, the Bolivian government has brought in a wealth tax, set to affect the country's 152 richest people Protest by rural mining indigenous workers, who demand better wages and working conditions. Photo: Karol Moraes/Shutterstock

Just a few months after Argentina decided to introduce a wealth tax on large fortunes to assist the government during the pandemic, northern neighbors Bolivia opted to follow in their footsteps. On December 28, Bolivian President Luis Arce enacted a law through which the state can tax people whose wealth exceeds BOB 30 million bolivianos (USD 4.33 million), and the measure has been met with praise from the population.

The measures apply to every Bolivian resident, including foreigners with money invested in Bolivian businesses. The government estimates that 152 of the country’s richest people will be affected by the new law.

</p> <p>Those worth between BOB 30 and 40 million will be taxed 1.4 percent, while fortunes of BRL 40 to 50 million will be hit with a 1.9 percent rate. A 2.4 percent rate will apply to those with even larger fortunes.</p> <p>The law — one of the first on the left-wing agenda of President Arce — passed with a huge majority in a House floor vote. Battling inequality was among Mr. Arce&#8217;s leading campaign promises, and he says wealth tax and redistribution will benefit&nbsp; “thousands of Bolivian families.”</p> <p>Luis Arce made his name as the Economy Minister of former President Evo Morales, who ruled Bolivia from 2006 to 2019, managing to reduce poverty from 38 percent to 15 percent during that time.&nbsp;&nbsp;</p> <p>Despite the economic achievements during Mr. Arce&#8217;s time in government, the return of his Movement for Socialism party to power occurred in the middle of the <a href="">Covid-19 pandemic</a>. In Bolivia alone, the health crisis pushed the unemployment rate to almost 12 percent during 2020, with an estimated GDP contraction of 7.3 percent according to the World Bank.&nbsp;</p> <p>Bolivia has one of Latin America&#8217;s highest rates of coronavirus deaths per capita, with a total of 10,226 fatalities and over 210,000 cases. The <a href="">most-affected zones</a> in the country are outside of major urban centers, leading to fears about the health and safety of Bolivia&#8217;s poor and remote indigenous communities.</p> <h2>Bolivia looking toward the post-pandemic period</h2> <p>Despite the turmoil of 2020, Bolivians can just about spot a glimmer of light at the end of the tunnel. On Wednesday, the Arce government sealed the purchase of 5 million doses of the <a href="">AstraZeneca coronavirus vaccine</a>, by way of a contract with Indian pharmaceutical company Serum. According to the central administration, these shots will be added to stocks of the Russian-made Sputnik V vaccine to immunize &#8220;100 percent of the country&#8217;s &#8216;vaccinable population.'&#8221;</p> <p>Meanwhile, Bolivia still has to overcome the economic damage of the pandemic. Among the main problems is one that is shared by South America as a whole: almost two-thirds of the Bolivian labor market is made up of informal workers, many of whom enjoy next to no job security at the best of times, nevermind during a pandemic.</p> <p>With the new wealth tax, the Economy Ministry expects to raise around BOB 100 million, which could be transformed into crucial financial aid.</p> <p>However, Bolivia expert Fernando Molina warns that the country&#8217;s economic problems were not created by the pandemic, instead they were aggravated by it.</p> <p>“The country is experiencing a serious economic crisis. The state is underfunded, there is a risk of capital flight and loss of foreign exchange reserves. Unemployment has increased significantly. President Arce is trying to keep the state the same size, but that&#8217;s difficult. The short-term future suggests it will be turbulent, in which adjustments come way before achievements.”

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Lucas Berti

Lucas Berti covers international affairs — specialized in Latin American politics and markets. He has been published by Opera Mundi, Revista VIP, and The Intercept Brasil, among others.

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