The fight between the National Government and the Autonomous City of Buenos Aires wrote this month a new episode of a long saga. Trying to isolate this episode and consider only the legal aspects (after all, it resurfaced as a result of a ruling by the Supreme Court of Justice) is to approach it from a partial perspective. The same happens with political or economic condiments. The federal tax sharing law is the pledge of this fight, but it is also an old political debt that did not know, could not or did not want to solve the distribution of tax resources once and for all.s.
Together. If there is an institution that the hard core of political groups should feel responsible for, it is the constitutional reform of 1994. Cristina Fernandez de Kirchner, eduardo duhalde, Horace Rosatti, Juan Carlos Maqueda, Eugenio Zaffaroni, Carlos Corach, Elisa Carrió, just to name a few, were conventional constituents. Also the leaders already deceased Raul Alfonsin, Alvaro Alsogaray Y Anthony Cafiero. Almost a sample of the political dialogue that led to a very broad consensus on almost all issues. But there were others in which the constituents, as long as they did not open cracks in the agreements reached, postponed their treatment, deriving it to Congress, which would dictate special laws. Ball out in order to obtain what each group was looking for: re-election only once, direct electoral system, third senator for the minority and the political autonomy of the City of Buenos Aires. The current president of the Court, Rosatti Hoursrecognized that this was one of the great potholes of that reform: postponing a political agreement that never took place to distribute fiscal resources.
Twenty-eight years have passed and the mentioned law, which had a term of execution in 1996, was never voted on.. If, on the other hand, patches to modify the coefficients that correspond to each jurisdiction (23 provinces and the CABA) and that have a precedent in the Law of 1988 Federal Tax Share, also the result of a pact between Alfonsinism and Peronism that already governed Buenos Aires. This jurisdiction was precisely the wedding duck in the curious system of distribution of tax resources: it gave up 6 points more than it received and as compensation, years later, Carlos Menem would grant him the “Conurbano Fund” that was $600 million and that inflation after 2002 was mercilessly liquefying. From that moment on, she was always the helping hand to provide discretionary resources through the Contributions of the National Treasury (ATN). or finance public works plans in municipalities or provinces that otherwise would have to wait their turn. A “give and take” that, in fact, put aside fiscal federalism. A new co-participation law with consensual and automatic values would only be possible with the agreement of all the provinces: it is enough for one to block it for it to continue as it has been until now, with correction and patching.
tributes. Taxes are classified as direct and indirect. The first are those that are taxed on assets or income and are viewed as such: Earnings, Personal Assets, Real Estate or Patents. The indirect ones, which are applied to the value of a good or a consumption and can be hidden behind the final price: son fuels, VAT, export duties (withholdings), import duties (tariffs), etc. In a federal system, like Argentina’s, the jurisdiction of each state (provincial and national) must be organized to see who collects what type of tax. But as the tax administration wanted to be simplified, a single collection window (the AFIP) and a distribution were made to avoid double taxation.
Another “historical” problem was the creation of the Autonomous City of Buenos Aires as a jurisdiction equivalent to a province that from 1996 began to absorb functions that the National Government had in that territory. Like transportation, Justice (at least a part), Justice and, lastly, security, the cause of the conflict with the central power. It is assumed that these resources should be subtracted from what was allocated to the Nation and not to the rest of the provinces, because there would be a “saving” by not allocating troops to the Federal Police, for example.
accounts. The best example is that of VAT, whose generalization from the 90s brought rationalization, but also gave rise to many provinces to seek extra funds with two taxes: Stamps and Gross Income, which account for 80% of the collection average tax rate of the provinces. It is of little use that the consensus of economists and accountants label it as the most perverse of taxes, a candidate, moreover, to appear among the objectives to be minimized in any memorandum of understanding with the IMF or the World Bank. Unlike VAT, it is a tax paid by the consumer and cannot be downloaded, so it produces a “cascade” effect on the rest of the production chain.
The final sum is always 100 when taking percentages. In other words, a first step in the distribution of “shared” taxes is to know how much the Nation keeps and how much the total of the provinces. Then comes the coefficient that each one applies on the basis of various indicators, to obtain the final result.
The first difference is that they are not proportional to the amount of population, which would be a very simple count. Other factors are also involved, such as income level, population density, to name a few, which causes the values to have changes. Who wins? Generally two types of provinces: those of the “poor” North and those of the “rich” South, to the detriment of the productive strip of the center of the country and, above all, of the Province of Buenos Aires plus the City. According to an IDESA calculation, so far in 2022, 22% of the population lives in the former and receives 34% of co-participated resources; 33% of the population lives in the center and south and receives 41% and 45% of the population lives in the metropolitan area and receives only 25% of the co-participation mass for the provinces. With these figures, the alleged fight between the Province and the City of Buenos Aires is a distraction game to avoid the underlying conflict: the districts that generate resources vs. those that absorb them. The Economist George Hill he has no doubts: there is no way to discuss a new partnership because it is a “zero sum” game responsible for decadence and backwardness. “It must be eliminated directly and go to a system like the one prior to the distribution laws, in which certain taxes finance the Nation (Customs, Profits and Social Security) and others for the provinces (VAT in its entirety, those that tax the heritage)“, Explain.
In the latest report on the distribution of tax resources, the IARAF points out an interesting fact for the provincial coffers. Income tax grew by 17.5% real year-on-year: the national government sent to the consolidated provinces plus CABA $688,634 million for co-participation, special laws and compensation, compared to $334,241 million for the same period of the previous year. And when considering the performance of each particular jurisdiction, CABA was the one with the highest real growth (+8.6%) while others such as Catamarca (+7.1%) and Buenos Aires (+5%). Its director, the economist Nadin Arganaraz, emphasizes that, in the organizational scheme of a federal country, the distribution of responsibility that each one has in the provision of public goods and the distribution of financing is essential. Argentina many years ago should have a new federal co-participation law, which is still pending and what is in force is done through fixed weights without solid support behind it. “What should be sought are mechanisms that guarantee a principle of equity that does not harm the creation of economic activity.”, he concludes.
This, dumped into an Excel spreadsheet, is one thing, but automaticity implies greater real autonomy and the role of many governors in being lax in charging direct taxes and requesting works or services at the expense of the Nation, introduces them under an umbrella of fiscal irresponsibility. to win votes in the short term, but that is turning them into a vassal economy of the National Executive Power.
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