President Javier Milei boasted this Saturday from Rome of being able to carry out a fiscal adjustment of 15 points of GDP while the provincial governors They couldn’t make one of 1.5% of GDP. But the truth is that this year subnational states are going to be under severe financial stress.
According to an analysis of tax collection prepared by economists Melisa Sala and Javier Okseniuk from the consulting firm LCG, in 2024 the provinces They are going back 15 years in terms of distribution of fiscal resources. Without a 2024 budget, Milei is going to liquidate its resources.
This explains the claims for the restitution of Income Tax on salaries or compensation for loss of resources due to the decision to endorse last year the modification promoted by the former minister regarding the closure of the previous government. Sergio Massa.
“In total we expect that the provinces will be left with just 28% of the total collecteda level similar to that of 15 years ago,” point out the economists, who explain that “this year the provinces will see their participation in the total national revenue reduced because the increase in tax resources will be driven by non-shared taxes.
What are taxes that will rise but will not be distributed?
- Export duties from the end of the drought and the honesty of the applicable exchange rate (for now an 80% official/20% CCL scheme). As the government shows signs of playing to delay the exchange rate again, it is expected that later the “blend” will change to make it more attractive to exporters.
- Country Tax, due to the expansion of the tax base and the increase in rates established last December to 17.5%. It could raise about $7 billion. It is not co-shareable but 30% is spent in the provinces through funds managed by social organizations.
“In parallel, the main co-participating tax – Earnings – will be affected by last year’s reform that raised the non-taxable minimum for the earnings of the 4th category of employees in a dependency relationship to 15 Minimum Living and Mobile Salaries,” he points out. the job.
Does the cut reach the provinces?
Returning to President Javier Milei’s idea regarding the magnitude of the adjustment, The LCG report warns that of every 10 pesos reduced in spending, only 2 would be contributed by the provinces
“These numbers show that the cut to provincial transfers will potentially have only a limited impact, given that even if they are completely reduced 20% of the 5 adjustment points can be achieved to balance the financial result,” the study states.
Without 2024 budget: the next battle against the provinces
An item to have Keep in mind that in 2024 the same 2023 budget applies, extended by decree. Until now, the government has decided to maintain the same budget items as last year, with an expenditure of $37 billion and to apply a “blender” to the funds corresponding to the governors.
The study maintains that “The non-approval of the Budget for 2024 implies that nominal credits are maintained that came into force in 2023 and opens the possibility for the Chief of Staff to readjust items with a certain independence.”
“In a context of high inflation, This could enable the Government’s decision to liquidate the transferred amounts, significantly reducing the weight of budget transfers to the provinces without major legal restrictions,” the report explains.
Strictly speaking, it must be taken into account that Most discretionary funds, those outside of co-participation, are created by law, so the government is obliged to pay them. Although they are not sent automatically, after a certain period they have to do so.
The Hhypothesis indicates that if the government were to propose a Budget Law, it should update the credits based on inflation. Then the cut of this type of items should be made transparent and probably will not get the votes in Congress. Hence it is thought that this year, there may not be a 2024 budget.
Source: Ambito
