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Land is Free
Land is Free

SA69. Argentina by Fernando Scornic Gerstein

| Land Is Free |

With 2.791.8101 Square Kilometres of surface Argentina is one of the largest countries in the world and with 36.223.9472 inhabitants one of the comparatively less populated. The actual ratio of inhabitants per Square Kilometres, 13, is one of the lowest in Earth.

In spite of being as a whole an almost empty country, the population is mostly concentrated in an about the city of Buenos Aires and some other few large cities like Córdoba and Rosario (about 12.000.000 people).

Being a country with such an abundance of land and so few inhabitants, nevertheless large sectors of the population live in slums surrounding the big cities, with no access to land.

This situation moved the Catholic Church to issue recently an Episcopal Document about the land problem in the country, proposing different solutions. In the foreword to this document Monseñor Carmelo Juan Giaquinta points out that the relation of the Argentineans with land “is maybe one of the worst in the World”.

Really it is like that, but it should not be so if we look at some of the circumstances of Argentinean history.

Many of the founders of the country in early XIX Century were physiocrats, including General Manuel Belgrano, one of the National Heroes and Bernardino Rivadavia, its first constitutional President. Many other prominent figures were imbued by physiocratic ideas. The physiocrats were French economists and philosophers during the second half of the 18th century. They held that land and productive labor were the primary factors of production and advocated the “impot unique” – a tax on land.

Although the official independence from Spain was only declared in 1816, the country had been in practice independent since the 25th of May 1810 revolution.

Already in 1812 the provisional government issued a decree forbidding the sale of Public Land. But it was in 1826 under the Presidency of Bernardino Rivadavia when a formal law was passed – the law of Emphyteusis – stating that public land could only be leased for twenty years periods paying to the State a canon of 8% on the assessed value for cattle raising land and 4% for agricultural land.

The law was excellent and if it had prevailed, Argentina would be now – as it was until 1920 (when free land, was still available) – one of the richest countries in the world. But it did not prevail. Rivadavia was a “Unitarian” supporting the idea of a centralized government which could impose progressive policies. He was defeated by the “federals” a loose alliance of provincial leaders (caudillos) that rejected his ideas.

Rivadavia was force to resign, the Law of Emphyteusis was denaturalized and slowly abandoned, permitting the creation of large estates or “Estancias”. Finally the Law was officially repealed in 1857 and the progressive ideas of Rivadavia were forgotten until 1917 when a Uruguayan Scholar, Andrés Lamas, published a famous book: “The Economic Work of Benardino Rivadavia”.

Argentina fell into the domination of an agrarian based oligarchy, but the existence of so much free land secured the country’s economic progress until the 1920s. It is by then that massive migration caused an increase in land values, that without proper taxation has been since – in general lines – the feature of the country.

Nevertheless there were attempts to impose land taxation, mainly under the influence of the Civil Radical Union, a Centre political party, which although facing enormous resistance by the ruling classes, imposed a moderate land taxation scheme in the Province of Córdoba under the Radical Governor Amadeo Sabattini and in the Province of Entre Rios, also under a Governor of the Civil Radical Union. Unfortunately these were only provincial measures. Since the 1930 military coup that overthrew the Constitutional Radical President Hipolito Irigoyen, the Federal level of the country was ruled by the Conservative Party using fraud and violence in the polls.

There was also an attempt to impose urban land value taxation in the city of Buenos Aires in 1923 by the Radicals and the Socialist, but the law – initially approved – was repealed in the same year.

In 1921 a “Liberal Georgist Party” was created, based on the ideas of Henry George, but beyond some local electoral succeses it failed to gain national support.

In 1943 a military coup – with notorious fascist influences – defeated the fraudulent Conservative Government and under the influence of general Juan Domingo Perón engaged in a program of reforms that gave Perón popular support. In 1945 Perón won the elections and was elected President, engaging almost immediately in a nationalistic and autarchic program that after some few years of bonanza put the country on its knees.

Perón – who in the early years had the support of some advocates of land taxation like Antonio Manuel Molinari and Mauricio Birabent – never undertook any serious program of taxation reform. But he did one important thing: he frozed urban and agrarian rents and in the midst of a process of inflation this caused a massive transfer of income from the landowners in favour of those who rented land from them.

According to our opinion this action – jointly with some important social laws – was the reason for the permanent popular support of Perón.

Perón was deposed in 1955 and after that there were no significant efforts undertaken to impose land taxation until 1969 when a military dictator, General Onganía, enacted a law imposing a 1.6% annual tax on the capital value of unimproved agrarian land.

Onganía was quickly deposed and the law abandoned, although under its influence Argentina had the largest harvests in many years. Apparently the land tax was an incentive for agricultural production.

In 1973 the author of this paper was called by the Argentinean Minister of Economy, Dr. Aldo Ferrer, and asked to draft a project for rural land taxation. The project – in which I proposed to tax all land and not only rural land with an annual tax of 2% on the unimproved value of land – was published by the Ministry of Agriculture, but never implemented.

There were also other laws taxing the “potential (imputed) rent of agrarian land”, at quite low taxation levels, but they were never really enforced.

In 1986, under the presidency of Raúl Alfonsín – first constitutional president after the military dictatorship – the Secretary of Estate for Agriculture, Agrarian Engineer Lucio Reca, drafted a project for taxing agrarian land with progresive rates that went from 1,7% to 4%. The Project was sent to the Parliament, but facing strong opposition from the peronists it was never approved.

In recent times Héctor Raúl Sandler, leader of the Union of Argentinean People – a centre party – was an important advocate of land taxation. Persecuted by the military government he went into exile, then returned to Argentina where he continues to be the leading figure advocating land value taxation in Argentina.

In 2001 the author drafted a new program of tax reform, based on a land tax of 3% on the value of urban and rural land. The project has been “under study” by the National Government since June 2005.(4)

The actual situation is that land taxation as such is virtually non-existant in Argentina. There are no taxes on capital gains from land and no transfer taxes.

Only the local governments collect land taxes – with substantial differences in its rates according to the different provinces – although the taxes always fall on land and buildings jointly.



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