The decision to withdraw the fiscal chapter of the omnibus law complicates the objective of achieving zero deficit this year. In 2024 there will be a recession and that will negatively impact revenue collection.
The Minister of Economy, Luis Caputo would be giving up resources for 1.4% of GDP according to the adjustment plan that he presented a month ago when he said that this year he planned to end the total deficit of the national public sector. Strictly speaking, it is a extremely optimistic estimate prior to the decision to remove from the omnibus law the tax chapter.
From the private sector it is believed that the government was not in a position to fulfill its promise to the IMF of reaching a surplus of 2 points of GDP with the fiscal program that it has just withdrawn. . Some market analysts hardly assume that could reach 0.8 points, among the most optimistic. The most pessimistic believe that it could be between 0 and half a point.
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There are several elements that come into play. The first is that Minister Caputo cannot prevent a recession this year, which will end up affecting tax collection. Martín Polo, economist at Cohen Argentina, estimates that the loss of resources would be 1 point of GDP. But also the original estimate was with a total deficit of 5 points and in reality in 2023 it was 6 points.
That in turn has as a counterpart an increase in withholding collection of 1 point due to the recovery of exports that were lost last year. A recent report from the Argentine AgroIndustrial Council (CAA) estimates that US$19 billion in exports were lost in 2023, which will be recovered in 2024.
On that side, the sum equals zero. Therefore, Caputo should raise as much as he can through another revenue boost. One of them is the extension of the PAIS Tax to all imports, for which it hopes to add 0.8 points of GDP. For that it does not need to go through Congress.
In the opposite sense, has already given up more or less half a point of the additional withholdings that it expected to charge for the application to all exports. He had already agreed to withdraw it from some 30 regional economies, but its application to industry remained.
For the package personal assets, the reversal of Profits and the moratorium estimated to obtain another half point. Of this, the most substantial was Profits. The moratorium and especially money laundering, depended on public acceptance. Probably in these calculations the minister has included a less optimistic estimate.
In that way, The loss of resources would be 1.4% of GDP, without taking into account the reduction in retirement spending that was included in the plan by 0.4 points.. If the article that repealed the update formula in force until now is removed from the omnibus law, Pension spending will continue to expand as before. The formula conspires against the decline because takes into account past inflation. So, if the evolution of prices tends to decrease in the coming months, pension expenditures will tend to increase in real terms.
Source: Ambito
