One of the The most important definitions that President Javier Milei made in his speech for the first anniversary of his government is that in 2025 he intends to “reduce national taxes by 90%.” This implies that national revenue, estimated at more than US$120,000 million, should be generated next year, with only 5 taxessomething that – at first glance – looks titanic.
According to him tax vademecum prepared by the Argentine Institute of Fiscal Analysis (IARAF), there are 46 national taxes, out of a total of 155. That is to say, that There are 109 taxes collected by the provinces and communes. Both experts and businessmen agree that the greatest impact on company costs is not national tax pressure, but rather that of subnational governments.
Beyond the best-known taxes in Argentina at the national level, such as VAT, Income Tax, Bank Debits and Credits, withholdings on exports, import tariffs or Personal Goods, there are others much less known to the public that may be candidates to disappear, simply because they would not impact the treasury. Others include:
Tax on vehicles automobiles, motorcycles and boats.
Tax on ships and aircraft recreation or sports.
Tax on electronic products.
Tax on insurance.
Tax on cellular and satellite telephony.
Surcharge to gas natural
rate security National Administration of Aviation Civil (ANAC)
rate airport use
On the other hand, there are taxes that generate revenue quickly that are more difficult to replace. It is about the indirect, which “penalize” consumption. The best known is the Value Added Tax (VAT), with a rate of 21% (when it was first introduced in the ’70s, its rate was 13%). But there is also the Tax Alcoholic Beverages, which applies to beers and non-alcoholic beverages (includes mineral water). Among this group, fuel taxes are those that have a certain impact on total collection.
Potentially, the Government could eliminate a large number of taxes that increase the price of things, but that would not impact the collection.
If the latest collection form released by the Customs Collection and Control Agency (ARCA) for November is analyzed, The “Other Taxes” item, which brings together all these types of small taxes, generated $506,887 million in the first 11 months of the year. That represents just 0.4% of the total collection.
Strictly speaking, if the Government could reduce the amount of taxes, those that generate little revenue and increase the prices of some goods unnecessarily sound like the first option.
Provincial tax autonomy
The tax reform that the economic team has in the pipeline implies “return tax autonomy” to the provinces, as Milei said in his speech. As is known, according to the constitutional order, The provinces precede the Nation in existence.
Originally, each province behaved as an autonomous state. They issued currency, had armies and collected taxes. When the national union was sealed in 1853, They gave up their power to issue currency and form their own armies and were left with the possibility of collecting taxes.
It was assumed that the Nation had for itself the rights of the Buenos Aires Customs. But, over time, two of the taxes that collect the most in Argentina became VAT and Profits, that “co-participate”.
They are collected by the Nation, but then distributed based on the contribution of the geographic Gross Domestic Product (GDP) of each subnational state to the national total. What Milei proposed then is that the reform aims to the responsibility for the collection of these types of taxes falls on the subnational states. That would force a deep political negotiation with the governors since the tax sharing law would have to be changed or eliminated. It does not seem to be a simple task that can be implemented in just one year.
Macri’s fiscal pact
The last agreement that there was between the Nation and the provinces to reduce the burden of taxes was in 2017. At that time, a fairly gradual tax reduction schedule was established. In the case of the Nation, Profits and withholdings were included, while the provinces had to eliminate Gross Income for most activities after five years.
If this pact had been fulfilled, today, the majority of governors would not be able to collect this tax, which is the most questioned by companies, because it is applied to billing at each step of the production chain, which generates increased costs and final prices.
Source: Ambito
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