IVA - Oficina de Presupuesto del Congreso

ANALYSIS OF NATIONAL TAX REVENUE – December 2020 and yearly total

by Juan Fourcaud | Jan 14, 2021 | Tax Revenue

Driven by an incipient economic revival and the increase in Wealth tax rates, tax revenue grew 38% in nominal terms and 1.6% in real terms in December, registering for the fourth consecutive month an increase above inflation. However, in 2020, it suffered a real drop of 7.4% year-on-year, which doubled that recorded in 2019 and completed a cycle of three consecutive years of decline.

In the last month of last year, VAT revenues grew 11.7% YoY and recorded the first real increase in twenty-six months. But there were falls in Social Security and Export Duties resources since the rise in the exchange rate did not offset the fall in foreign trade.
The recessionary context, deepened by the pandemic, is the main reason why tax revenue has fallen in 23 of the last 25 months in real terms.
The annual drop in VAT (17.7%) tripled the drop recorded in 2019 and the Income Tax doubled its decrease (-7.1%).
The combination of a drop in registered employment and the lag of nominal wages with respect to the general price level makes the rate of expansion of the wage base to be systematically below that of the CPI since June 2018. Social Security resources fell 11.4% in real terms last year.
The improvement in the exchange rate did not prevent the decline in revenues from Export Duties (29.5%), partly conditioned by the advances in foreign trade operations made by the agro-industrial sector at the end of 2019.
Despite previous regulatory reforms to strengthen revenue, in the first quarter of last year there was already a real drop in revenues, prior to the beginning of the social isolation caused by the pandemic.
In April, inflation-adjusted revenues fell 23.7% YoY, the sharpest drop since April 2002, largely due to the decrease in activity caused by the Mandatory Preventive Social Isolation (ASPO).
Tax relief measures to alleviate the economic effects of COVID19 on taxpayers reduced tax collection by an estimated AR$79.2 billion in the first half of 2020.
The year ends with four consecutive months of positive variations.

TAX EXPENDITURES – METHODOLOGICAL ISSUES AND ANALYSIS OF 2021 BUDGET

by Juan Fourcaud | Dec 17, 2020 | Tax Policy and Fiscal Federalism

Due to tax exemptions and promotional regimes, the Budget Law estimates that next year’s tax expenditure will be AR$995.8 billion, equivalent to 2.64% of GDP, a level comparable to that of this year.

Of this total, 73.9% consists of special tax treatments included in the current tax legislation (AR$735.7 billion) and the rest is for various economic promotion regimes (AR$260.1 billion).

For 2020, total tax expenditures are expected to reach AR$714.7 billion, equivalent to 2.63% of GDP and with a similar composition.
In the projection for next year, lower VAT collection stands out, with a total of AR$444.3 billion (1.18% of GDP); more than half of it is due to reduced rates on meat and vegetables.
Fuel Tax is the second largest tax expenditure, with AR$132.7 billion, mainly explained by the difference between the rates applied to gasoline and diesel fuel (AR$83.36 billion).
Nearly half of the reduced income tax collection (AR$85.5 billion) is due to the exemption applicable to the income of judges and officials of the national and provincial Judiciary.
The two promotional regimes with the highest tax expenditure are those of the province of Tierra del Fuego (AR$77.8 billion) and Knowledge Economy (AR$18.4 billion).

The deferral of tax payments, the accelerated amortization in Income Tax and early refund of tax credits in VAT are not considered tax expenditures; these measures are mainly contained in different promotional regimes.

TAX BURDEN ON PRODUCTIVE ACTIVITY. MAIN RESULTS

by Juan Fourcaud | Dec 3, 2020 | Tax Policy and Fiscal Federalism

The purpose of this report is to evaluate the consolidated tax burden on the meatpacking, metal-mechanic, supermarket, transportation, and hotel sectors in thirty locations in the country.

Under certain assumptions and without including some taxes such as Fuel Taxes or Export Duties, the average tax burden is equivalent to 12% of the companies’ turnover.

There is an important tax burden dispersion by activity and location. From a minimum of 7.5% of the total turnover for a meat packing activity carried out by an SME in the city of San Luis, to a maximum of 17.3% for a large hotel in Bariloche.
There are also differences in the tax burden depending on whether it is a small or large company and between firms in the same industry: from 25% in hotels to 50% in the meat packing sector.
There is double or triple taxation due to the overlapping of taxes, which makes it difficult to know the real cost that the productive sectors face.
This study refers to a tax burden baseline and is limited by the lack of information requested from chambers of commerce and municipalities, but which was not provided.

TAX BURDEN ON PRODUCTIVE ACTIVITY – METHODOLOGY

by Juan Fourcaud | Nov 26, 2020 | Tax Policy and Fiscal Federalism

The OPC is developing a project to analyze the tax burden on a set of economic activities at national, provincial, and municipal levels in Argentina, a research that covers 30 cities in 23 provinces and the Autonomous City of Buenos Aires.

This work is a methodological approach, which includes a mapping of provincial taxes and their capacity to provide public funds.
The overview of the main taxes, their legal basis and their collection impact aims to determine, among other things, the true magnitude of tax burden, tax burden on employment and the amount of resources generated by each tax.

Due to difficulties in establishing benchmarks and making comparative measurements, the focus will be on measuring the “theoretical tax burden”, according to the place where each activity is carried out. The assumption will be that each activity is carried out only in one place of residence and is taxed in only one jurisdiction.

In summary, this study, focused on 30 cities and on 5 sectors of activity, has revealed the existence of more than 150 taxes on economic activity in Argentina with places that accumulate between the three levels of government from 21 to 40 different taxes, which gives clear indications of the difficulty faced by any economic agent in complying with them.

The complex universe of the provincial tax system makes it difficult to have a solid basis for comparison and its performance is different per jurisdiction: unlike 2018, where some provinces took advantage of the opportunity to increase their tax rates up to the limit allowed by law, in 2019 there is a declining trend.

The permanent modifications in rates and fees diminish the legality and transparency of the system.

FISCAL IMPACT OF BILL ON SUBSIDY FOR THE IMPORT OF DIGITAL SERVICES

by Juan Fourcaud | Nov 3, 2020 | Cost Estimates

Bill S-2286/2020 states that the economic context resulting from the pandemic has led to a growth of micro and small enterprises in Argentina, many of them highly dependent on the internet.

In this framework, the Bill proposes a tax relief for the imports of digital services for entrepreneurs consisting in the exemption of PAIS tax and VAT for imported digital services, provided that such imports are made by entrepreneurs or Venture Capital Institutions in accordance with Law No. 27,349 of Support to Venture Capital.

It is estimated that the fiscal impact would imply a drop in tax revenues of AR$3.28 billion for the year 2021.

FISCAL IMPACT OF BILL ON THE CREATION OF A REGISTRY OF ENERGY-INTENSIVE IRRIGATORS (S-0024/2020)

by Juan Fourcaud | Oct 22, 2020 | Cost Estimates

The Bill proposes the creation of a Registry of agricultural producers that use irrigation with intensive electric energy consumption and provides for a set of tax measures to encourage those producers to replace that system for less energy-demanding irrigation technologies.

The benefits included in the Bill are a reduction in the VAT rate for the purchase of electric energy, reduction in current energy rates and access to credit lines for energy reconversion.

The analysis carried out by OPC shows that the direct fiscal impact is very low, since the VAT reduction mechanism on purchases of certain links in the production chain only has a financial impact for the taxpayers subject to that tax.