Last week, Argentina’s Congress passed a massive tax reform aiming to boost the country’s languishing economy and improve its inefficient tax system.
With 52 votes in favor and only 15 against, the approved tax bill will provide greater incentives to foreign corporations to invest in the country via a reduced tax burden, which is one of the highest in the world at 35 percent of GDP.
Additionally, the hope is to reduce Argentina’s fiscal deficit from 4.2 to 3.2 percent by the end of 2018.
Here are some of the bill’s major reforms:
Argentina’s budget for 2018 estimates a growth of 3.5 percent with 15.7 percent inflation, a significant drop from 2017’s rate of inflation of 24 percent.
Several tax experts, politicians and economists spoke out on Macri administration’s tax bill and its overall ramifications.
Cesar Litvin, a CEO of Lisicki, Litvin & Asociados in Buenos Aires, told
Bloomberg that this is “the best tax reform of the past 30 years” and, while not fully comprehensive, “it’s a substantial improvement” to what had been previously in place.
“Obviously this is going to reduce tax collection, but the way of compensating is with more investment, more economic activity and more employment,” Litvin added
Economist Pablo Tigani doesn’t think
this tax reform will lead to the expected results as companies lack the necessary “incentives” to invest in a country facing structural adjustment policies, including low salaries and pensions that lead to reduced consumption.
that the new law is “regressive” in nature as it benefits those with greater income while “debilitating” the working class.
Tax expert Hernán Gilardo agrees and says
that the new law “transfers the burden to the common citizen and offers a clear tax discount to companies.”
“I’m not sure the Argentina State will have greater revenue from this tax bill. One can touch up all taxes, but if the country continues with this level of public spending, this is a ticking time bomb,” Gilardo concluded
Cristina Fernández de Kirchner, a former President and now Senator with the opposition, stood against the bill, stating
that in its current form the tax reform would “[underfund] Anses (National Social Security Administration) in favor of entrepreneurs.”
Eduardo Aguilar, a Senator from the Province of Chaco, also opposed the bill.
"We are asked to vote for uniform taxes for all of Argentina and this lacks the slightest of common sense: we are asked that employer contributions for a company from Chaco or Salta be the same as those for a company in the capital,” Aguilar said
Argentina’s President Mauricio Macri recently moved to reform the country’s pension plan, sparking outrage among pensioners.
As a result, several violent protests sprouted throughout the country, leaving behind dozens of people arrested and hundreds of injuries.
Macri’s pension reform will hike the retirement age for both men and women and introduce a new formula to calculate payments, one that is expected to lower the amount received per retiree.
All translations from Spanish are the author’s.