For
Nadin Arganaraz
IARAF holder
The recent resolution of the Supreme Court of Justice of the Nation, which increases the automatic co-participation coefficient corresponding to the Autonomous City of Buenos Aires (hereinafter CABA), has once again ignited the discussion on the division of the national collection between the nation, the provinces and the CABA.
As you know, this discussion has two fundamental aspects: primary distribution on the one hand and secondary distribution on the other. The first mentions how the national collection is distributed between the nation and the provinces and the CABA. The second focuses on the distribution of the part corresponding to the jurisdictions between each of them.
Given this framework, here it analyzes the evolution of the effective distribution of the national collection between the nation, the provinces and the CABA in the last 30 years, including this year 2023. Specifically, we work with the actual automatic primary distribution, i.e. with the automatic final percentage that the Provinces and the CABA have withheld during this period.
Evolution of the effective primary distribution of resources in the period 1993-2023
Argentina is a politically organized country with a federal structure. The The tax sharing system currently in force is based on Law 23.548 of 1988 with its amending and complementary laws, which are permanently the subject of debate as they lack objective bases for establishing the distribution of resources, while due to the constitutional mandate of the 1994 reform they should have been replaced in 1996 by a new institutional arrangement.
A recent peculiarity that goes to the heart of the distribution debate is the case of the CABA, which, despite being considered as a member of the whole, obtains its shareholding percentage from the legal shareholding of the National Treasury. The current increase in its coefficient, from 1.4% to 2.95%, affects the effective primary distribution of resources, but also to the actual secondary distribution.
The infographic shows the evolution of the effective participation of the consolidated provinces and the CABA in the collection of national taxes, net of social security resources and taxes on foreign trade, since in essence they are not co-participants.
As can be seen, over the past 30 years there were three distinct phases the effective participation of the Provinces and the CABA in the collection of national taxes. A first phase runs from 1993 to 2002, characterized by a permanent decline in the participation of the 24 jurisdictions. A second phase runs from 2003 to 2015, reflecting a practically stable participation of around 40%. And, finally, a third stage which runs from 2016 to 2023, with current holdings of around 50%.
The significant conclusion that can be drawn is that, over the last 30 years, the year 2023, intermediate precautionary measure of the Supreme Court of Justice, would be the year with the greatest participation of the Provinces and the CABA in the distribution of the national collection. In fact, they’d get basically $51 out of every $100 in domestic tax collection they share.
The historical context of the Argentine partnership Initially, Law 23.548 established that the overall resources of the partnership were distributed in 42.34% for the Nation, 56.66% for the provinces and 1% for a National Treasury Contribution Fund (ATN) whose destiny was to deal with the emergency situations and financial imbalances of the provincial administrations.
During the 1990s a large number of national government laws and decrees were introduced which directly or indirectly changed what was established by the basic regime. We can mention the deductions before primary distribution or on the shareholding mass destined for a certain sector, also called pre-participation. It was stipulated that the national government was authorized to withhold 15% plus a fixed sum of 43.5 million pesos per month from the co-participating mass in order to: i) 15% to finance the social security system and other operating expenses ; ii) the fixed sum to be distributed among the provinces with economic difficulties.
Subsequently, and in the context of the 2002 crisis, the “Nation-Provinces Agreement on Financial Relationships and the Basis for a Federal Tax Sharing Regime” was ratified. It consisted of three key goals: i) Sanctioning a tax sharing scheme; ii) make the nation-province fiscal relationship transparent; iii) refinance and renegotiate provincial debts.
With the Decree 705/2003, in 2003 the participation of the CABA was changed. It was set at 1.4% of the total amount raised.
In 2006, Law 26.075 established the need for more investment in education, science and technology by the national government, provincial governments and the autonomous city of Buenos Aires. A specific allocation of co-participating resources has been established for a period of five years, consisting of the increase, compared to 2005, of the annual co-participating resources corresponding to the Provinces and the Autonomous City of Buenos Aires under the regime of Law 23.548 and its amendments and additions.
in the year 2016 the national government has decided to gradually restore pre-participation to the provinces (Santa Fe, San Luis and Córdoba stopped making the deduction at the end of 2015) for an amount of 20% per annum, reaching the full return of 15 points in 2020. Furthermore, through Decree 195/In 2016, the coefficient for CABA has gone from the 1.4% established in 2003 to 3.75%. Then, in 2018, it was reduced to 3.5%.
Since 2018, also as a result of the tax agreement signed between the State and the Provinces, the gross shareholding mass has increased, on the one hand by incorporating the funds deriving from the suspension of specific withholding taxes on profits for ANSES and for Fondi (Conurbano and NBI) and, from other, by setting up a compensatory system to prevent the provinces (with the exception of Buenos Aires) from seeing their situation change compared to 2017. This led in 2020 to the highest participation of the Consolidated Provinces + CABA in the national tax collection of the period 1993-2020 .
At the end of the year 2020, the CABA changed the primary coefficient of distribution of national resources, which, in fact, went from 3.5% to 1.4%. First, through the Decree 735/2020 of the National Executive, its participation in the creation of the Fund for Fiscal Strengthening of the Province of Buenos Aires was reduced by 1.18 percentage points. Then, with law 27.606, a new modification was introduced, reducing the coefficient by 0.92 percentage points to 1.4%, and assigning the jurisdiction a fixed amount with a quarterly update of inflation in order to be able to meet the expenses of their police forces.
Finally, in December 2022, the nation’s Supreme Court of Justice issued an interim order that orders to deliver 2.95% of the pool of participating funds to CABA and logically withdraw the funds it obtained through the Treasury Bonds account to finance the spending of its security forces. If no further changes occur in the year 2023, the Provinces and the CABA will close the year accounting for their highest effective primary participation in the collection of national taxes participating.
In the year 2022 the Provinces and the CABA effectively remained with 49.5% of the total shared national tax collection. The precautionary provision of the Supreme Court increases the legal coefficient of the CABA from 1.4% to 2.95%. From an effective point of view, this regulatory change implies a change of 1.4%, ie this year the group of Provinces and CABA will keep 50.9%.
The quantification of the effective primary distribution of the national collection is a relevant element of the discussion on the federal fiscal framework of our country. The other key element, as mentioned at the beginning, is the actual secondary distribution. The analysis of the distribution of resources must be closely related to the distribution of spending responsibilities of each of the existing levels of government.
Source: Clarin
