Argentina to slap steep taxes on luxury imports

The Argentine government said Friday it will slap stiff tax increases on luxury cars, boats and planes, in its latest bid to staunch a flight of hard currency. "We will send a bill to Congress to modify the tax code, with the goal of increasing taxes on luxury cars, boat and tourist planes," said President Christina Kirchner's new chief of staff Jorge Capitanich. The government's goal is to "discourage extravagant consumption," which Capitanich said does not contribute to the overall productivity of the nation. The measure is the latest in a series of government moves aimed at curbing inflation, which could exceed 30 percent in 2013, and stemming a sharp drop in its hard currency reserves. Sales of luxury cars -- almost all of which are imports -- have exploded this year in Argentina, as the rich have taken advantage of favorable exchange rates to acquire top car brands like Mercedes, Audi and Land Rover, among others. At official exchange rates, one dollar is worth six Argentine pesos, but on the black market one can get as many as 10. The euro officially trades at eight pesos, but can fetch 12.5 on the black market. Central Bank reserves in Argentina are on the brink of falling below a $32 billion dollars -- a huge decline from $52 billion just three years ago. Inflation also is seen as a huge problem. Earlier this year, Buenos Aires imposed a price freeze on Argentina's largest retailers, but that measure was by and large unsuccessful in preventing consumer prices from spiraling upwards. Capitanich also announced Friday that Kirchner has named Augusto Costa, who has close ties with new Economy Minister Axel Kicillof, to be Argentina's new minister of commerce.