Argentine companies that carry out their work formally bear the tax burden heavier from all countries of South America and the developed economies that make up the OECD. This is like a study of the Argentine Industrial Union (UIA), which compared 7 taxes in 30 countries, with the result that Argentina’s formal sector bears the heaviest backpack
“If we measure Argentina by the size of its GDP, the tax burden is the tenth highest in that group of 30 countries. But if we measure the formal sector of the economy, which is the one that pays taxes, we are at the top of the tax burden, with 50.7%followed by Brazil,” he said Charles Abeledohead of the Fiscal Policy Department of the UIA.
“We discover that in Argentina food has 40% tax, drinks 50% and zero kilometer cars, over 50%,” he added. Daniel Funes of Rioja, head of the UIA, who led the meeting at the headquarters of the manufacturing body, in Avenida de Mayo, while a few meters away the metro line A was running with delays due to the blackout.
“In general, nobody calculates that half of what they pay is in taxes. This inhibits the ability to consume, to produce because it lowers competitiveness,” added Funes.
The study analyzed the tax burden on the formal sector of the economy through the comparative study of 7 taxes in 30 countries, all from South America and the OECD, to which were added Spain, Holland and Switzerland.
Measured by Gross Product, the study ranks Argentina 10th in terms of tax burden (collections/GDP) among 30 selected countries.
But when you look at the tax burden on the formal sector, Argentine businessmen who are being formalized they end up leading that league tabletogether with Brazil, as underlined by the taxman Abeledo.
“If there are co-owners in an apartment building who don’t pay the expenses, they end up paying the rest. So the owner of an apartment who pays, has a tax rate of 3.57% which becomes 7.14%. This is what happens with the tax burden of the formal sector in Argentina”.
Abeledo pointed out that Argentina is the country with the highest burden in 3 of the 7 taxes analyzed for the 30 countries: Profits, Movables and Stamp Duty.
It also sits among the top six countries with the highest burden in the other 4 taxes (VAT, Tax on Debits and Credits, Gross Income and Municipal Security and Hygiene Rates).
The specialist made a detailed breakdown of taxes and explained why the country is at the top of the most burdensome rankings in each case:
- Income tax. “Argentina leads the ranking of 30 countries, with a profit rate of 35%. Although it is progressive, the truth is that a very low profit reaches the maximum rate. Between inflation and the lack of adequacy of these values, any company ends up paying the highest rate,” said the specialist.
- VAT “There are countries that apply more than 21%, but in Argentina the VAT is widespread and ends up being high due to the generalization of the base. When a company has a favorable VAT balance, as happens when purchases exceed sales, this the financial gap between the payment and collection of VAT is recovered late, or never, due to inflation.The same happens when a company sells with reduced VAT, at 10.5%, the balance accumulated becomes itself a tax.
- Tax on credits and debits. “When it started in March 2001, it was said to be for two years and nine months and going on. It started at a rate of 0.25% and quickly moved to 0.6%, with a charge of 1.2% for credit and debit banking operations. For those who are formalized and placed in the bank, that 1.2% is an additional working capital to be able to work. This tax is a rarity, your Brazil and was repealed during the second presidency of Lula, the Senate has not renewed.
- Personal property. “It represents less than 1% of the collection but it makes a hellish noise, because it irritates. Spain has higher rates, but on equity, net of debts, and not on gross equity”.
- Gross Income. “The great concern of the Argentine industrialist, which is the gross income, is paid with withholding. The industry should have a maximum tax rate of 1.5% and there are provinces that use gadgets to double it. That 1 .5% becomes 2.5% and if the buyer is a hydrocarbon company, add 1% and end up paying 3.5% instead of 1.5% The taxpayer, an industry, has few tools to defend yourself: file a tax lawsuit and immediately seize the accounts. We are first in the standings”.
- Stamp duty. “There are many places where you no longer pay and here you continue to pay, with rates of 1.2%. We are in first place in the standings with this tax”.
- Safety and Hygiene. “It is something that has been distorted, the municipalities apply a tax instead of a fee for a service, with charges on Safety and Hygiene which are charged to the bill of the company that pays the tax and not as consideration for a service”.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.