In the discussion for the refund of the income tax involving the national government and the provinces, at stake are not only the funds that have stopped entering the treasury – and therefore to the governorates through sharing – due to the exemption of this tax to hundreds of thousands of employees. Also on the table are the funds that the Treasury distributes among the Provinces and that the Nation administers in a more or less discretionary way.
These are the reminders, precisely, discretionary transfers. These funds are on the right track parallel that of federal tax sharing, i.e. the mechanism that distributes tax collection money directly to the provinces without the national executive being able to interfere.
According to data accessible from the Congressional Budget Office Clarionthis year the total of the items corresponding to “discretionary transfers” have an assigned budget -current credit- of 2.25 billion pesos, equivalent to 1.3 points of GDP. Of this amount, 1.7 billion have already been allocated.
Formally, there are those who say that all these funds have little “discretion” because they are linked to various programs or agreements between the Nation and the Provinces. And there are also others that depend on credit lines granted by international credit institutions. In other words, the government of Javier Milei I wouldn’t have much leeway delay or block disbursements. “If these agreements were broken, it would be violation of tax consent and the Provinces could go to the Supreme Court” say those who know the intricacies through which the money that goes from the Nation to the Provinces circulates. This is not what President Javier Milei and Economy Minister Luis Caputo think.
The main games
Of the discretionary transfers considered “currents” Of note, in order of importance, is the item corresponding to the National Teacher Incentive Fund; the Fiscal Strengthening Fund of the Province of Buenos Aires (the part of the share that the government of Alberto Fernández took from CABA to finance the operation of the Buenos Aires Police) and the line of financial aid to the Provinces and Municipalities. (see infographic)
Transfers to the Provincial Pension Funds are also envisaged; the so-called Various Transfers which in principle are dedicated to hospital works; the Educational Management and Socio-educational Policies line; the funds that arrive at the City of Buenos Aires (Law 27,606) to finance the transfer of the Federal Police and the funds called Relations with the Provinces and Regional Development (the famous contributions from the National Treasury).
Of the transfers considered capital expenditure, These seem to be the most important:
Funds for road works outside the so-called National Road Network; technical-financial assistance and development of sanitation infrastructures; Financial interventions to Provinces and Municipalities: infrastructure and equipment and support for the development of public works.
As you can see, many elements identifiable with the “public work” exactly what Milei first said she wanted to cut because “there’s no money”.
Discretionary transfers had an undisputed winner in the government of Alberto Fernández: governor Axel Kicillof. A consultant’s report Aerorio He underlined that starting from October 2023 “transfers to Province of Buenos Aires participation in total discretionary funds went from 42.6% to 43.2%. Far behind are the cities of Buenos Aires (6.6%), Chaco (4.2%) and Santa Fe (4.2%, respectively), while at the opposite end are Tierra del Fuego, Chubut and Jujuy.
Perhaps to anticipate the cuts that are coming, the Province of Buenos Aires voted a few hours ago to sharp increase in taxes. Axel Kicillof’s government gained support from the opposition and some libertarians for this initiative. The imposition arrived a few months later, as the former Minister of Economy of that province recalled, Hernan Lacunzathat the Buenos Aires government would subsidize, for example, the travel of secondary school graduates.
The truth is that behind each of these discretionary elements there is some law or some agreement signed by one, more or all provinces. But They are not part of federal tax sharing.
This very feature is what the national government would ultimately use for block the transfers if he does not get the support of the Governors, for Profits and for the rest of the initiatives I send to Congress.
“First let’s turn off the tap and we will stop transferring funds, then we will sit down to discuss with each governor,” he commented this week Clarion an official directly involved in the standoff.
It is not known what the size of the cut will be in games. The maximum is 1.3 points of GDP. Those who defend the lawfulness and non-discretionality of these funds admit that in this way the Milei-Caputo tandem could end up cutting a third of the funds. But not anymore. At Casa Rosada they think differently. “The governors want more funding but they don’t want to pay the replacement costs of the income tax, or income tax as we call it, they are playing politics and we won’t let them,” they told the Ministry of Health this week. Economy.
The Government’s reading is that income tax is the most progressive and exists anywhere in the world. And there is no reason to give up the money it generates at a time when it is imperative to reduce the deficit to turn off the engines of inflation.
Source: Clarin
