Seek support from the provinces in the Senate to approve the reduction in Income Tax for the fourth category, and the permanent refund of VAT. The tax on the purchase of dollars for imports helped reduce the deficit in August.
The Minister of Economy, Sergio Massa, came out stronger last week by obtaining approval in the Chamber of Deputies of the modification of the Income Tax for the fourth category. Now he’s going for more. He agreed with the governors of the provinces of northern Argentina to share two taxes: the one that taxes bank debits and credits and the PAIS tax. It is worth assuming that this is the bargaining chip to get the votes in the Senate that will allow the 2024 Budget to be approved and sustain the reforms that Massa launched in recent weeks, which include a permanent refund of VAT.
Profits and VAT are the two pillars on which the Argentine collection building is based and its products are shared with the provinces, in a ratio of 56% to 44%. Therefore, any minimal thing you want to do with them requires their approval. “The governors have proposed to me and we are going to incorporate as an addendum to the budget presentation, a mechanism for sharing part of the check tax and part of the PAIS tax to take care of the accounts of the provinces and I also want to assume that commitment here,” he said at an event in Salta. with all the leaders of Norte Grande, where the radicals Gerardo Morales (Jujuy) and Gustavo Valdez (Corrientes) were. The two opposition governors reminded the official that he had forgotten to mention that detail in the framework of a fiery speech.
The PAIS tax has come to bring some relief to the treasury coffers. Its extension to the majority of the purchase of dollars for the payment of imports with a rate of 7.5% generated a mass of extraordinary resources. In August that tribute raised $212,000 million, 506% more in nominal terms than in the same month of 2022. Then, in the eighth month, the primary deficit decreased 93% in real terms. This was a consequence of the fact that total national income increased by 6.5% real year-on-year and primary spending fell by 8.5% year-on-year. “In absolute value, the primary deficit was $36 billion. In terms of annual GDP, it would be equivalent to 0.02%. Which places it below the deficit of the previous year and 2021,” said the Argentine Institute of Fiscal Analysis (IARAF).
That is also why the impact of the tax reductions that Massa announced (such as the increase in the Profit floor, the Buy without VAT, the suspension of the payment of monotributistas, the relief for the self-employed) and the announcement of credits and other expenses would remain bounded.
However, For the IARAF it would not even be necessary for the provinces to be compensated due to the reduction in Profits, at least this year. The entity headed by Nadín Argañaraz makes the following calculation: “Given that due to the Revenue reform, the provinces and CABA would lose 0.06% of GDP between now and the end of the year, if the ‘Buy without VAT’ system were fully applied, “They would gain 0.04% of GDP, given that for the reimbursement they would charge an extra 0.11% of GDP due to greater collection,” the entity states in a report. This is because by returning money from purchases, it would increase consumption, which in turn generates greater collection of Gross Income and VAT itself. since although this measure is presented as a tax refund, in reality it is a refund on the purchase price made by the Nation. VAT continues to be collected and continues to be shared until the end of the year.
Source: Ambito
