The Ministry of Economy published the tax information corresponding to the year 2025. The primary surplus (before payment of debt interest) was 1.4% of GDP, somewhat lower than in 2024, which was 1.8% of GDP, although the contrast with 2023 is still notable when the primary deficit was -2.9% of GDP. When debt interest payments are computed, a financial surplus of 0.2% of GDP is left. In light of the chronic fiscal deficits, this overwhelming achievement in such a short time is unprecedented and commendable.
The main strategy used between 2023 and 2025 consisted of adjusting public spending items below inflation, causing them to decrease in real terms. This is how expenditures on public employment, economic subsidies and discretionary transfers to provinces fell. While pension and family allowance spending, which are adjusted for inflation, tended to remain in real terms. With the decline in inflation, this strategy to adjust public spending is beginning to run out.
In addition, there is other evidence that points to points of vulnerability. For example, with data from the Ministry of Economy it can be estimated that the positive financial result equivalent to 0.2% of GDP was achieved thanks to:
-They applied very distortive taxesAmong the most harmful are the check tax and export duties, for the equivalent of 2% of GDP.
-The public investment was reduced compared to 2023 in 0.9% of GDP.
-It is estimated that they are not counted as expenses but rather as an increase in debt approximately 0.8% of GDP in debt interest.
These data show that complex fiscal problems remain. It is obvious that for integration with the world to generate the expected positive results, it is essential to eliminate taxes such as checks and export duties and improve infrastructure. It is also obvious that to sustain the macroeconomic order it is important that public debt does not increase. In short, they are evidence that it is advisable that the stage focused on adjustment be followed by another where more qualitative issues such as improving the quality of taxes and public spending are incorporated and emphasized.
The challenge is even greater when the situation of the provinces with their municipalities is included in the analysis – as is appropriate in a federal country. At these levels of government, another 4.3% of GDP tax pressure is added with very distorting provincial taxes such as Gross Income and Stamps to which municipal sales taxes are added (a type of municipal gross receipts tax). The role of local governments in providing crucial services for the quality of life of people and the competitiveness of production is also very important. Transformations at these levels of government are not going to occur spontaneously. On the contrary, the trend is towards a worsening of provincial and municipal public finances, including several in deficit situations.
The stage of consolidating fiscal balance by prioritizing the quality of taxes and spending requires moving from emphasis on adjustment to emphasis on the organization of the State. For this, an agreement on tax coordination and responsibilities between the Nation and the provinces is essential. Both on the side of taxes and on the side of functions, the central axis of the transformation is to eliminate overlaps. For example, that the Super VAT absorbs Gross Income and municipal taxes. That is to say, a better tax (VAT) absorbs very bad taxes (Gross Income and municipal taxes). On the responsibilities side, apply the same logic. For example, clearly establishing that interprovincial infrastructure is the responsibility of the Nation and the rest is the exclusive responsibility of local governments. The pension system that includes both the national and the provincial funds is also very important.
Having achieved fiscal balance is a huge achievement. But Its consolidation requires expanding the strategy from adjustment to ordering. This poses new challenges, particularly, organizing the federal system and pension systems.
*The author is an economist and president of IDESA.
by Jorge Colina
