ANALYSIS OF NATIONAL TAX REVENUE – JUNE 2021

ANALYSIS OF NATIONAL TAX REVENUE – JUNE 2021

In June, tax revenues grew 69% year-on-year in nominal terms and 12.8% adjusted for inflation.

The increase was driven by the depreciation of the exchange rate (37% YoY), the increase in international commodity prices and regulatory changes. But the main factor behind the increase was the low basis of comparison since a year ago the Preventive and Compulsory Social Isolation (ASPO) was fully in force.

  • Higher customs duties revenues (47.6% YoY) – due to the increase in the exchange rate and the recovery of imports – drove an improvement in VAT.
  • The nominal increase of the dollar and the values of exported goods promoted an increase of 59.1% in the collection of Export Duties (YoY).
  • Social Security resources increased for the third consecutive time in eight months, although the expansion of the wage bill has been systematically below the CPI since June 2018.
  • PAIS Tax collection contracted again in the year-on-year comparison.
  • The growth of the economy continues to be the main determinant of tax revenue, which fell steadily since mid-2018, due to a lower level of activity and the implementation of Law 27,430 on Tax Reform and began to recover after the worst effects of the measures adopted to contain the health effects of the pandemic.
ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – MAY 2021

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – MAY 2021

The increase in total resources (net of Central Bank profits) and a decrease in expenditures led the National Government to record another decrease in the primary deficit in May, which reached AR$ 72.8 billion, an improvement in real terms of 81.2% with respect to the imbalance recorded in the same month of last year.

  • Excluding transfers from the Central Bank to the Treasury, total revenues expanded by 41.5% year-on-year (YoY) during May, mainly because of the growth in tax revenues, to which was added AR$ 58.24 billion from the Solidarity Contribution in the context of the pandemic.
  • Primary expenditure declined because of the drop in pensions (10.0% YoY) and public sector salaries (7.9% YoY), but also because the funds allocated to mitigate the effects of the health crisis were lower in the year-on-year comparison with May 2020.
  • Total expenditure, including debt interest payments, contracted 15.8% YoY.
  • Expenditures on social programs was reduced by 41.5%, basically because of the discontinuation of the IFE and the AETP. However, other social assistance programs were strengthened and, in some cases, increased by more than 70%.
  • There was a real increase of 36.3% in capital expenditures for the month of May (AR$ 58.69 billion), with increases in all components, but mainly in the funds allocated to the Pro.Cre.Ar. housing plan.
  • Expenditures related to the COVID-19 pandemic totaled AR$125.43 billion at the end of May. The funds allocated for this purpose increased by 308.9% since the budget began to be executed, partly because of higher exceptional revenues.
ANALYSIS OF NATIONAL TAX REVENUE – MAY 2021

ANALYSIS OF NATIONAL TAX REVENUE – MAY 2021

Partially because of the low basis of comparison, national tax revenue increased 72.7% in nominal terms and 14.3% in real terms as compared to the same month of the previous year.

National Government revenues totaled AR$ 862.48 billion, which was the ninth consecutive month of increase (adjusted for inflation).

This behavior is partly explained by last year’s poor fiscal performance, when the mandatory isolation due to the health crisis was still in force, which lowers the basis for comparison.

The 39% nominal increase in the exchange rate also had an influence, which relatively improved the revenues from Export Duties and from the customs component of VAT, as well as from Income Tax. In addition, regulatory changes boosted the collection of shared taxes.

For taxes related to foreign trade, May 2020 also implied a low baseline, since the settlement of many transactions had been advanced to the end of 2019. An improvement in the international prices of exported goods also had an impact on the tax revenue increase.

In absolute terms, the taxes that most contributed to the increase in revenue were VAT (accounting for 30% of the increase), Income Tax (20.2%), Export Duties (18.3%) and Social Security contributions (19.6%), which rose for the second time in eight months.

The PAIS Tax collected AR$ 5.49 billion in May, which represents a nominal reduction of 53.8%, because of the greater restrictions on the purchase of foreign currency.

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – APRIL 2021

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – APRIL 2021

Because of the increase in resources and the decrease in expenditures, in April the primary and financial deficits fell by 85.2% and 77.4%, respectively, compared to the negative figures for the same month of last year. The economic result was positive by AR$15.97 billion.

These figures do not include the exceptional transfer of profits of AR$230 billion made by the Central Bank to the Treasury in April last year.

  • Tax revenue and Social Security resources grew significantly, by 44.9% and 14.2% year on year (YoY) in real terms, respectively. In both cases, the low comparison base resulting from the Mandatory Preventive Social Isolation (ASPO), which came into effect on March 20, 2020, had an impact.
  • Expenditures related to the COVID-19 pandemic were lower than those of last year and this influenced a drop in primary spending. In this item, social benefits and transfers to provinces fell by 26.8% YoY and 64.9% YoY, respectively.
  • Expenditures on personnel and pensions decreased at rates of 12.9% YoY and 13.4% YoY, respectively.
  • In the first four-month period, 97.4% of the budget allocated to REPRO II, prior to the last budget expansion provided for by Administrative Decision 460/2021 at the beginning of May, has already been executed.
  • In April, the implementation of social programs reached 41.1% of the appropriation allocated for the year, above the general average of 28.1%.
  • During the first four months of the year, the initial approved budget increased by AR$47.9 billion. Among the items that had the largest increases in relation to their initial appropriation were the purchase of vaccines against COVID-19 and logistics and distribution services (AR$29.2 billion), and the REPRO II Program (AR$22.2 billion).
ANALYSIS OF NATIONAL TAX REVENUE – APRIL 2021

ANALYSIS OF NATIONAL TAX REVENUE – APRIL 2021

In April, national tax revenue totaled AR$817.88 billion, the highest increase since April 2003, with a real increase of 40.8% and a nominal increase of 105.5%.

The nominal exchange rate increase and the low base of comparison for last year -when the economic activity was restricted by the preventive and mandatory social isolation- partly explain this result.

Social Security resources grew in real terms for the first time since September 2020.

The most significant variations above inflation were those of Income Tax (36.4% YoY), VAT (35.7%), Wealth Tax (224.5% YoY) and co-participated taxes (154.4% YoY), in some cases because of regulatory amendments that expanded the tax base.

Tax revenue had a negative real increase since January 2020, a situation that was reversed in September 2020 steadily up to date.

PAIS Tax collection shrank again and accrued USD 2.17 billion since its creation.

BUDGET EXECUTION OF SOCIAL INVESTMENT IN CHILDREN AND ADOLESCENTS

BUDGET EXECUTION OF SOCIAL INVESTMENT IN CHILDREN AND ADOLESCENTS

In mid-2020, there were 13,151,586 children and adolescents (up to 17 years of age) in Argentina. 57.1% of that universe was poor and 15.8%, indigent, rates much higher than the general average of the population.

  •  About 4.6 million of children and 2.9 million of adolescents were below the poverty line.
  • Poverty and indigence rates in households with children and adolescents were three times higher than those in households without children and adolescents.
  • Of households with employed persons in which minors live, 40% were below the poverty line. This means that despite having at least one salary, this income was not enough to cover the family’s basic needs.
  • Of children and adolescents in compulsory education age (4 to 17 years of age), 96.9%were in school, most of them attending public schools. For the non-compulsory segment, this percentage drops to 14.5%.
  • The incidence of poverty drops significantly if the head of the household completed his or her secondary education. However, one out of every six households headed by a person with university education was below the poverty line.
  • The actions undertaken by the national government to care for children and adolescents implied a budgetary effort of 3.6% of GDP in 2020, 12.7% of total expenditure.
  • Public policy aimed at improving the general conditions of the population, which also have an impact on this segment, required an additional 2.4%.
  • State efforts were insufficient to substantially improve the living conditions of this age group, and it is necessary to pay more attention to children and adolescents to guarantee their access to basic rights.
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