Of course There is still a long way to go to reach that scenario that the Government rejects. The Senate still has to approve the bill, the President should veto it as anticipated, and Congress should insist with two-thirds of its members. Although it seems distant and difficult for it to happen, it cannot be ruled out, since the dialogue opposition and Kirchnerism together have sufficient numbers to be able to insist on their law if necessary.
The fury from the ruling party over what was approved in the Deputies has more to do with the political signal that is occurring, rather than because of the fiscal problem that it could cause to the Government in its desire to achieve zero deficit.
According to data from the Congressional Budget Office (CPO), the fiscal cost of increasing retiree benefits by 8% and updating them in 2024 would be 0.43 points of the Gross Domestic Product (GDP). According to a detailed study by the technical office of Congress, the total cost of the pension system it would go to 7.57% of GDP, while in the scheme designed by Luis Caputo, that is contemplated in the DNU that repealed the formula of the law promoted by the previous government, the cost is 7.14 of GDP.
We are not talking about points of GDP but rather tenths, which although in round numbers imply large amounts, Within the structure of the National Public Sector they have a minor impact.
“The formula provided for in this bill determines an expense equivalent to 7.57% of GDP (including bonuses, which are automatic), which would imply 0.74 points more than with Law 27,609 (previous government) and 0.43 points more than with the formula of DNU 274/24 (Milei)”, says the OPC.
If the expenditure components are broken down, the OPC details that the expenditure on pension benefits of the approved project would be 0.62 points with respect to Law 27,609 and 0.32 points in relation to the DNU.
In family allowances, spending would decrease 0.11 points with respect to Law 27,609 and 0.08 in relation to DNU 274/24 and in Non-Contributory Pensions it would increase 0.06 points with respect to the Law and 0.03 with respect to the DNU 274/24.
On the other hand, the OPC clarifies that Compensatory bonds represent 0.81% of GDP according to the project, which is 0.16 points higher when compared with the other scenarios, since the approved initiative proposes that they be variable based on the difference between the lowest assets and the Total Basic Basket, while in the other cases It represents a fixed monthly bonus of $70,000.
What are tax expenses
If the cost of paying 8% to pensions is 0.43 points of GDP, it is worth remembering that in the scheme presented by the Minister of Economy, Luis Caputo, at the beginning of his administration, he points out that to achieve the adjustment 5 points required restitution of Income Tax, which is equivalent to 0.4 points of GDP.
But, for example, when Massa presented a Budget Bill with zero deficit, his proposal was to make all those who for some legal reason currently do not pay taxes. That tax expenditure last year was equivalent to 2.49% of GDP.
Last year It was $3.6 billion. Of them, $2.6 billion correspond to special treatments established in the respective tax laws and $995,057 million to benefits granted in the various economic promotion regimes.
This is official data. He Value Added Tax represents 54.75% of tax expenses, equivalent to 1.36% of GDP. “In particular, 86.58% comes from the exemptions and reduced rates – established in the tax law – and the rest, $269,262 million, from the benefits granted by various economic promotion regimes,” says an official report of the year. past.
For example, the tax expenses that affect the Income Tax is equivalent to 0.51% of last year’s GDP.
The opinion of economists
Alejandro Pegoraro, consulting firm owner Politikon Chaco warned Ambito that “in terms of the path chosen by the Government this can complicate the tax situation. What happens is that in some way they are endorsing that To achieve fiscal balance you have to liquefy retirement incomewhen logic would have to be the other way aroundachieve balance to improve retirement benefits.”
As he said, you can ““make spending in areas of the State more efficient, which would allow resources to be directed”so in his opinion the type of adjustment chosen by the Government “It seemed like they had it closer at hand.”
For his part, Hernan Letcher, director of the Center for Argentine Political Economy (CEPA) indicated that “when the Government made the adjustment on retirees, in addition to being insensitive, “He made the mistake that retirees consume, which affected the activity.”
“In strictly fiscalthe change voted by Deputies is financeable, because when you see how it resolved the deficit, it was 95% at the expense of retirees,” added Letcher, who maintained that “the Government itself promotes in the fiscal package a reduction in Personal Assets of 0.33% of GDP and proposes an increase in Profits that is 0.3% of GDP.” “That they suspend the reduction in Personal Assets,” he proposed.
Source: Ambito
