Antonio Aracrethe new head of advisors to the Presidency of the Nation and former CEO of Syngenta, the Chinese-funded agricultural technology provider touched an electrified wire. He proposed to create a new tax to solve the eternal fiscal red until the economy could grow again. An almost orthodox reasoning from someone who does not want to increase debt or cause inflation, but who has two questions to analyze: if the economy supports more tax pressure and if spending is so rigid as to not be an adjustment variable.
Bone scan. Different overlapping tax systems coexist in the Argentine tax structure: national, provincial and municipal. According to the statistics of the Argentine Institute of Fiscal Analysis (IARAF) lThe effective tax pressure during 2022 was 23.8% measured in terms of GDP and considering only national taxes. To this should be added the provincial and municipal taxes (which add between 8 and 9 additional points) and the complex tax effect of inflation. The national taxes that collect the most are VAT, Profits, on Foreign Trade (customs duties and withholdings), Fuel and Social Security contributions, which go to the pension system. Instead, Of the provincial taxes, almost 80% are distributed between two taxes: Gross Income (II.BB.), which taxes sales for which the merchant directly withholds the corresponding amount and Stamps, which is applied to transactions.
Since the end of 2019, the tax issue has tried to register within a framework of a nominally progressive policy, but the numbers do not seem to support this effort. In these three years, only in 2022 did the total collection exceed, according to the IARAF on official data, that of 2019 but with one caveat: last year there was an additional 0.26% in advance income tax, “ one time only”, etc. But the total collection, even with an economy that managed to recover economic activity, did not move the needle.
Is there room to raise taxes or, in any case, to increase rates? The question is the key to the saving proposal of one more tax. Nadin Arganarazdirector of IARAF He explains that, in his opinion, he does not have a concrete answer. “It depends on what it’s being compared against. Against a similar country or a theoretical scenario? A tax has diminishing marginal returns in terms of revenue. If one is created and its marginal performance is zero, it will not provide extra resources. But its performance, ultimately, depends on the entire tax structure as a whole”, he clarifies. For example, in the 2019-22 triennium there were taxes that increased their collection (Profits: +0.32% and Personal Assets: 0.36%) but that they only reinforced with advances and extra income; while two taxes compensated with their reduction the increase in pressure: Liquid fuels (-0.23%) and Social Security (-0.45%). The first, surely due to the great slowdown in mobility in 2020 but also due to the delay in its final price; the second due to the precariousness of the labor market and also the hole of forced inactivity during the pandemic.
Puzzle. These figures put on the table the difficulty of increasing tax collection and not generating debt or inflation and aligning economic policy with equity criteria. The focus is on tax evasion encouraged by a higher tax rate and the shortcomings of the administration. For the taxpayer Cesar LitvinyesAdding another tax to the current 167 seems “crazy”. “Since this government took office, it has created or increased rates on 24 taxes, but the collection has not increased, assimilating its behavior to the downward stretch of the Laffer curve,” he points out. Said curve marks a point from which everything that increases a tax rate will negatively affect the total product. Litvin refers, for example, to the case of Profits, where instead of going towards a 25% rate, the commitment was reversed and made progressive (between 25% and 35%, depending on the case). but that, with the restriction to the distribution in cash, implies an effective pressure of 39.5% on the final profit. “In other countries, the rates are higher, but there is less tax pressure on consumption or wealth,” he adds, and also puts the inflationary effect on earnings for individuals under the magnifying glass. “The steps are very short and inflation is distorting the tax capacity for people: with 100% per year, special deductions and non-taxable minimums should be updated monthly,” she warns.
Half Federalism. George Hilleconomist of IDESA, points out that the fiscal distress of the National Treasury coincides with surplus provincial funds. “The governors did not become great administrators, but liquefied expenses with inflation, especially they raised public salaries below inflation. It is the most spurious way to lower the fiscal deficit, because when inflation falls, the accounts will be unbalanced again ”, he clarifies. That’s why, emphasizes that from IDESA they propose that II.BB be eliminated. and all VAT collection is allocated to each province in which it is generated. “The fiscal situation would be neutral: VAT collects 7 points of GDP, of which 4 go to the provinces and 3 to the Nation; Profit collects 5 (3 for the provinces and 2 for the Nation). The provinces would continue to receive 7 points of GDP and the Nation, 5. Of course, as the southern provinces generate a lot of VAT and the northern ones, little, a convergence fund must be designed to give them time to develop and generate their own VAT”, he lists.
These types of proposals highlight that before raising a rate or creating another tax, it is convenient to take a closer look at how the entire system is managed, which encourages widespread evasion and establishes inequities that in the long term threaten economic activity and job creation. .
Administration. in the last Annual Tax Survey 2022-23 made by KPMG2023 companies believe that the tax burden will increase this year. Fernando Quiroga Lafargue, the company’s Tax and Legal partner, says that from the responses to consulted companies (large and medium-sized) anxiety arises, due to the lack of predictability in tax matters. Above all, with the behavior of the provincial tax administrations regarding the application of Gross Income, the accounting of favorable balances and what they consider a lack of objectivity to assert their rights in the face of the claims generated. “As II.BB. It is the most distortionary tax. Any serious tax reform should focus on this tax.“, Explain. He draws attention in the study that almost 20% of those surveyed directly prefer not to open activities in certain provinces due to the tax difficulties caused there. Many times, the great reforms begin with what is closest.
