Carlos is an accountant who, with great difficulty, has opened his own office, from where he deals with small companies and merchants. Until the previous year he was employed, then he left the company and from 2022 he tried his luck as a freelancer.
Has two employeesis married (his wife works as a part-time tax collector and earns less than $50,000 a month) and has three children, works twelve hours a day or more, but year after year he gets frustrated and sees that the dreams he had when he graduated are getting further and further apart.
Carlos’s dreams weren’t crazy, but something an accountant could only aspire to 25 years ago, having a house of their own, a car and twenty days off a year.
Today reality marks it like this the work takes much longer than I imagined when I received it, it’s a lot more complexthe customer market has shrunk, labor costs have risenand slowly the dream of owning a home is disappearing from their “wish list” given the inclement reality of the self-employed.
Carlos rents the three-room apartment in which he lives and, on the other, a small office in the City of Buenos Aires, where two employees help him carry out all the tasks that daily life brings to the professional in Economics, in addition to the numbers for the year 2022 have been the following:
Carlos can barely maintain his consumption, he doesn’t saveand has lost the dream of having a house of his own, but being an accountant he knows that his problems don’t end when he looks at his meager economy, but that everything gets worse when he analyzes the Income tax for the year 2022That must pay in June 2023, cost him a sleepless night.
When you precalculate the tax, it gives you a total of $1,558,454. If your annual savings (which are being reduced from month to month by inflation) were approximately $528,000, With what funds will you face your tax?
Furthermore, it will not only be the balance of the tax that you will have to pay, but also your advanceswhich implies double the tax immediately when you pay the deed amount in June, and you pay down payments of approx $311,000 every two months after the deadline. Thus, through the end of the year, it will face $933,000 in this concept.
It is clear that Carlos will have to do it to please the state severely limit its consumption, which in themselves were modest. Let’s say taxes and fees total $2,491,454, which means you need to allocate 33% of your monthly net income to pay the taxOf course, this will result in a very severe restriction, plus the fact that commissions can be increased if your clients accept the increase in them due to the index of inflation.
To pay these taxes, Carlos could be forced to move to a smaller apartment, obviously forgetting about the holidays, transferring the kids to a public school, as well as avoiding unnecessary outings.
It’s easy to understand what happened in Argentina from 2000 onwards. The Government, not changing the balance and being always late with general and personal deductions, advanced on the less well-off citizens, arriving at this current absurdity and perhaps even inviting them to escape in order to survive.
As you can see, Carlos does not earnonly access a subsistence economy, with almost no luxuries, of a depressed middle class that adds to its suffering a tax system that drives him into misery.
IRPEF treats surpluses as profits which are not such, but rather a minimal surplus with which to survive discreetly. Although he may have technical qualms, in these cases he is a consumption taxsince a person who has almost no savings must deprive himself and reduce his consumption to cover his taxpayer obligations.
Recall that Carlos is taxed on a portion of his income at 35%, a rate that until 2000 was reserved for those earning a net profit exceeding $120,000. i.e. US$120,000, which would imply today the official exchange rate, which only taxpayers exceeding $23,160,000 would pay 35%, which taken in blue rises to $46,320,000.
These figures clearly show us how governments that theoretically protect the vulnerable, or they call themselves popularthey end up undermining the existence of the middle class in such a frighteningly exaggerated way.
With the irrationality of public spending, in their desire to collect, politicians have transformed the income tax, at least for a large number of self-employed and employees, into a consumption tax or – to avoid sterile technical discussions – into a tax which, far from diminishing the savings capacity of those who have made large profits, it limits the consumption of people who barely cover rent, education, health and food.
* Mariano Ghirardotti is a shareholder of Ghirardotti & Ghirardotti
Source: Clarin
