When in the next few hours the Vice Minister of EconomyGabriel Rubinstein, and the chief adviser, Leonardo Madcur, sit down with the technicians of the International Monetary Fund (IMF) for the final sprint of the negotiations that they have been holding for three months, one of the points to close will be the cost of the drought and how it impacted the collection in order to be able to set a new primary deficit target for 2023.
According to estimates of the Argentine Institute of Fiscal Analysis (IARAF)in the first six months of the year the income of the AFIP represented 9.2% of the Gross Domestic Product (GDP)which it involves a decrease of 0.6 percentage points compared to the same period last year. They were $15.97 billion between January and June.
If taxes on foreign trade are subtracted, both withholdings on exports and import tariffs and the statistical rate, the tax revenue is equivalent to 8.6% of GDP, with a drop of one GDP point compared to the same period of 2022.
In other words, the fiscal cost of the drought on withholdings would have been 0.5 points of GDP so far, according to IARAF analysis. It is because last year they accounted for 0.8% of GDP and this year they dropped to 0.3% during the first semester. By your side, tariffs and the statistical tax lost another point. It is evident that the decrease in the collection of taxes related to purchases abroad is linked to the lower amount of dollars available and the lower activity that goes hand in hand with it. Tariffs explain 0.27% of GDP this year, according to private data.
The report also indicates that between January and June tax collection fell 6.1% in real terms. The taxes with the greatest drop in the period would have been export duties (59%), Fuels (41.3%) and import duties (16.7%). The taxes with the greatest increase would have been Personal Assets (9.6%), VAT (5.9%) and co-participating internals (5.3%).
In the negotiations with the IMF, it is expected that a new primary deficit target will be negotiated, which would be between 2.4% and 2.5% of the Product, taking into account the fall in the collection of taxes on foreign trade, which make a difference. Some analysts point out that If there had not been a drought, the Minister of Economy, Sergio Massa, would have been able to meet the goals.
As last year it had been possible to use 0.3 points of GDP from “property income”, which allowed the government to reach the 2.4% expected for the first year of the agreement, In order to repeat the same goal, the adjustment that the economic team would have ahead would be at least 0.9 points.
The LCG consulting firm states that “so far this year, the average collection has fallen by 6.3% per year measured in real terms and 29% of this total is explained by the retraction of the affected export rights due to the drought and the drop in import duties associated with a drop in purchases in the context of lower foreign exchange”.
“However, in June the collapse of a large part of the taxes linked to the activity also begins to weigh internal, which begins to more than overcome the expansion of the DGI VAT driven by the use of less physical money in an inflationary context ”, warns the consultant.
Source: Ambito
