The depth of the recession due to the double fiscal and monetary squeeze that the government is applying is worrying because cbegins to affect fiscal resources and it could complicate the government’s self-imposed goal of reaching the end of the year with a fiscal surplus of 2%.
According to private estimates based on data on co-participation transfers to the provinces during March, the collection of Value Added Tax (VAT), ornot one of the pillars of the tax system along with Profits, collapsed between 18% and 19%.
Although the collection corresponds to March, the reality is that it is the tax generated by the billing of the previous month, February, a period in which previous estimates – such as that of the Orlando Ferreres Economic Research Center – marked a drop in economic activity of 6%with a cumulative increase in the two-month period of 5.6%.
Tax collection is marking both the decline in activity and the mistake of having eliminated Income Tax for the fourth category last year. That tribute registered in March a real drop of 40% raspect of the third month of 2023.
Thus, if in February the fiscal surplus of $1.2 trillion was achieved by a combination of a decrease in collection of 5.7% in real terms with a 36.4% reduction in expensess, in March the loss of tax resources is likely to be worse.
From there we understand the government’s firmness in maintaining the reduction of expenses as much as possible, although now it will no longer be able to play with the liquefaction of pensions.
The Argentine Institute of Fiscal Analysis (IARAF) warns thatue “in relation to February, the Joint collection of VAT and Profits (which represents 54% of the total national collection) would have decreased by 11.6% in real terms.”
“This fall would have been above the average of the last 5 years (-2.2%),” says the study.
The data on tax revenues for March will be announced by the AFIP this Wednesday.
About, Jorge Vasconcelos, economist at the Research Institute for the Argentine and Latin American Reality (IERAL), toHe signed that “the recession is really very intense.”
“It is already known March collection and VAT fell from 18 to 19% in real terms. The decline is very strong,” she noted. Vasconcelos explained that the national government is not feeling the loss of fiscal resources as much because the revenue is replaced by the PAIS Tax.
As pointed out byto consulting firm LCG, “for the moment, the basis of the improvement in the fiscal result responds entirely to the adjustment of spending, which“It multiplies by more than 10 the adjustment that is reflecting the income affected by the recessionary context and by the elimination of the 4th category income tax.”
LCG explains in a report that the decrease in spending in the National Public Sector reached 38% in February versus a decrease of 3% in total income.
The recession affects the provinces
To the extent that economic activity collapses and revenue falls, The provinces feel the effect of the drop in shared resources.
According to the cconsultant Politikon Chaco automatic transfers of resources of national origin that include co-participation, special laws and compensation of the Fiscal Consensus sent They totaled about $2.2 billion in March.
“In the comparison cAgainst the same month in 2022, they show a nominal variation of 184.1%. In March 2023, shipments were for $781,941 million,” the report says.
Politikon Chaco indicates that “by discounting the inflation of the month of analysis (projected at 12.8% according to private and own projections), lThe real variation showed a strong decline of -27.9%, this being the seventh drop in a row and the fifth consecutive month where the decrease is double digits.”
“In addition, this is the strongest real decline in the last eight years, even higher than that observed in the toughest moments of the pandemic,” the consultant warned.
Source: Ambito
