Argentine lower house passes questioned tax breaks

BUENOS AIRES Thu Dec 11, 2008 7:04am EST

BUENOS AIRES Dec 11 (Reuters) - Argentina's lower house passed early on Thursday a package of tax breaks that the administration hopes will stimulate the economy but critics say could encourage money laundering instead.

The bill passed 132 to 83 at 3 a.m. and now goes to the upper house where President Cristina Fernandez's Peronist party and allies also have a majority.

The law includes huge tax cuts on undeclared offshore funds that are repatriated, tax incentives for companies that put under-the-table workers on the books, and deals for tax evaders who sign up for payment plans.

The no-questions-asked policy for bringing back undeclared funds drew fire from critics who said it would aid organized crime, but ruling-party lawmakers said money laundering laws still apply.

"The application of this law does not mean anyone is exempt from obligations" under the money-laundering law, said Peronist deputy Agustin Rossi.

After six years of robust growth, Argentina's economy is slowing down along with the rest of the world, and the government has announced a series of measures to protect jobs, including subsidized auto and consumer loans, and $21 billion for public works.

The slowdown has hit Argentina at an awkward time, when public finances were already looking tight as debt obligations soar in 2009. Officials have not said how much tax revenue they hope to generate with the bill passed on Thursday.

"The only objective is to sustain cash flow with money that comes from money laundering, from terrorism or drug trafficking," said opposition deputy Patricia Bullrich, of the Civic Coalition.

According to local media, Argentines have parked an estimated $140 billion offshore.

(Reporting by Lucas Bergman; Writing by Fiona Ortiz; Editing by Eric Beech)

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