Analysis of National Tax Revenue – April 2020

Analysis of National Tax Revenue – April 2020

As anticipated, inflation-adjusted tax revenue fell 23.7% year on year (YoY) in April. Beyond some tax measures adopted by the National Executive Power to assist the productive sector in coping with the economic impact of the Mandatory Preventive Social Isolation (ASPO), the fall is explained by the slowdown in economic activity.

Revenues from national taxes totaled AR$398.66 billion, which implied a growth of 11.6% YoY.

The most important taxes had a significant drop in real terms. Income tax collection fell by 30.9% YoY, VAT by 25.9% YoY and Social Security resources contracted by 24.7% YoY. In addition, foreign trade revenues fell 15.2% YoY.

Although the pandemic and the ASPO were the main factors behind the poor collection performance in April, other factors also contributed. From the regulatory point of view, VAT refunds for the purchase of food, the reduction of Employer Contributions for the health sector, the deferral of the SIPA component of Employer Contributions for two months and the freezing of part of the Fuel Taxes in effect during March contributed to the lower inflow of resources. From the macroeconomic point of view, the deterioration of the labor market and the contraction of international trade contributed to the sharp drop in revenues.

May revenues are expected to continue to fall in real terms. Although some economic activities were exempted from the quarantine during April, the impact of the measure on the level of activity remained. On the other hand, measures such as the reduction or deferral of Employer Contributions, the reduction in the rate of the Tax on Debits and Credits to Current Accounts and the VAT refund for dairy products will have an impact on May revenues.

Fiscal federalism in Argentina. Latest developments in historical perspective

Fiscal federalism in Argentina. Latest developments in historical perspective

A review of the country’s fiscal federalism reveals the complexity of its parameters and the difficulties to establish a definitive consensus-based regime between the national government and the provinces, a constitutional mandate that has been pending for 23 years.

The federal tax co-participation regime was established by Law No.12,139 of 1935. The regulatory dispersion continued until the integration set forth in Law No.20,221 in force until 1984, recurrently infringed.

Among the decisions that infringed that law was the unilateral transfer of education and health functions to the provinces, without the respective financial allocations. This was the origin of the National Treasury contributions, an arbitrary mechanism to remedy problems as those caused by that discretionality. In 1980 pre-co-participations were introduced when it was decided that a portion of the VAT would be use for Social Security.

At the beginning of 1988, Law No.23,548 established a temporary distribution regime still in force. The secondary distribution scheme is not based on objective criteria and the original primary distribution, which reserved 54% to the provinces, was permanently altered.

The 1994 constitutional reform included co-participation in the National Constitution and provided for the enactment of a framework law before the end of 1996. 

This mandate has not yet been accomplished and the most concrete legal approach was the series of fiscal pacts signed since 1992, whose interpretation and implementation led to legal disputes: federalism of concertation in our country lacks legal certainty.

Analysis of National Tax Revenue – October 2019

Analysis of National Tax Revenue – October 2019

In October, tax revenue totaled AR$446.17 billion, which implied a growth of 42.8% YoY. In the annual cumulative figure as of October, tax resources of the National Public Sector show a 46.8% YoY growth. Revenue decreased by 5.9% YoY in real terms in the tenth month of the year.

October revenues were reduced by the impact of the fiscal stimulus measures announced by the National Executive Power during the month of August. According to OPC estimates, those measures caused a loss of resources of around AR$35 billion last month. Excluding this effect, nominal revenue would have grown 53.9% YoY, and 1.4% YoY in real terms.

The measures mentioned above particularly affected the collection of Income Tax, Social Security and VAT. On the other hand, Export Duties increased in October with respect to the previous month because of a higher number of tons for export.

Analysis of National Tax Revenue – May 2019

Analysis of National Tax Revenue – May 2019

In May, tax revenue grew 50.4% in nominal terms with respect to the same month of the previous year but declined 4.3% in real terms during the same period. This decline deepens to 6.5% when considering the first five months of the year.

Overall tax revenue has been declining in real terms for eleven consecutive months, although it began to reduce the rate of decline.

In this context, Income Tax exceeded the collection expectations for the month with an increase of 7.5% year-on-year in real terms. Together with taxes on foreign trade, it is one of the taxes whose growth exceeded inflation.

VAT contracted by 8.1% in May, although this record implies a deceleration of the falls of the last seven months.

The decline in Social Security resources deepened because of the deterioration of the labor market and the changes in the employer contributions system. However, in the fifth month of the year, Social Security resources might have found its lowest level, and in the following months the trend may consolidate.

Analysis of National Tax Revenue – March 2019

Analysis of National Tax Revenue – March 2019

In the third month of the year, national public sector revenues grew by 37.3% in nominal terms compared to the same period of the previous year but fell by 10.5% in real terms. Similar behavior was observed in the first quarter of the year.

This performance also entails a decline compared to previous months and reaffirms that government revenues are strongly linked to the level of economic activity, as shown by the VAT DGI, which fell 7.3%.

Income Tax contracted by 18.5%, partly due to the deferral of some maturities. The significant growth in Export Duties allowed mitigating the fall in the most important taxes of the national tax structure (VAT, Income Tax and Social Security Contributions).

Analysis of National Tax Revenue – February 2019

Analysis of National Tax Revenue – February 2019

February tax revenue totaled AR$330.89 billion, which implied a nominal year-on-year increase of 40.4% and of 39.6% with respect to the first two months of last year.

In real terms, it declined 6.9% against February 2018, although the fall in inflation-adjusted tax resources was softened as of December.

Income Tax had a real recovery of 1.3%, and together with Wealth Tax and Export Duties, were the ones with the highest year-on-year increase.

Value Added Tax recorded a year-on-year decline of 11.5%, basically due to the fall in imports and the reduction of some taxes on foreign purchases and the lower level of activity.

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