The Argentine tax system does not meet its fundamental objectives or the minimum requirements it should meet: to raise enough to finance the activities of the state; reduce inequality; be efficient and not distorting economic activity; be simple, transparent and easy to comply with and control; and be stable to generate predictability.
The current fiscal plan is a consequence of macroeconomic instability and its emergencies, a heterogeneous economic structure with extensive informality, of an unresolved fiscal federalism and the responses of various governments to the increase in public spending. Thus, the frequent accumulated partial changes and emergency or transitional fees were maintained well beyond what was established. Once again, the temporary has become permanent.
All this has generated volatility and problems with the level and composition of the tax system, intrinsically related characteristics. About half of the potential is collected in various taxes, gap explained largely by tax evasion which generates a vicious circle: informality exposes the formal sector to very high pressures which in turn function as an incentive for greater informality.
Comparing Argentina’s tax structure with that of Latin American and OECD countries Significant excess taxes on goods and services, particularly some undesirable ones, such as the drop in taxes on exports and financial transactions. The lower participation in income, profits and property taxes is also evident.
From this diagnosis We at Fundar present a proposal for a comprehensive, federal and harmonious tax reform, based on increasing the burden of income and wealth taxes, to the detriment of those that fall on goods and services with undesirable characteristics. Likewise, it is neutral in terms of collection for both the Nation and the Provinces, taking into account that the level (expressed on the expenditure side) is decided by the citizens through their representatives.
Increase the burden of income taxes It is proposed to restore the employee income tax and combine it with personal contributions into a progressive tax that allocates its collection to the social security system, the main source of the public deficit. To promote formality, it is proposed to establish a negative income tax (subsidy) for informal self-employed workers (who would be formalized) or those with very low incomes. For self-employed workers, it is proposed to take part of the amount taxed with VAT as an advance on profits in order to reduce the horizontal inequality that affects them compared to single-tax earners and employees with similar incomes. Moreover, We are trying to prioritize and increase the progressivity of the monotax through tariff expansion and tariff increases, in order to maintain simplicity, while generating greater equity among workers and easing the transition to the general regime.
Regarding wealth taxes, the personal property tax must be expanded and coordinated at the federal level and coordinate, with the provinces that provide it, a personal tax on free enrichment. To do this, you need to improve your property tax assessment process.
For its part, pursuing the efficiency of VAT collection, it aims to automate refunds for capital goods and exports and eliminate exemptions and differentiated rates. We also propose to increase the burden on carbon emissions.
The greater collection foreseen by the previous proposals allows this reduce the burden of taxes on goods and services. In particular, it is convenient to convert debts and credits into a collection system for other expenses.
Likewise, it is proposed to eliminate export withholding taxes and to compensate for this loss of resources with the automatic increase that their disappearance would generate on income tax and VAT (among others), added to unify the corporate tax rate at 35% and establish a minimum tax assessed on sales or goods, impose an additional tax on income from natural resources, primarily hydrocarbons and mining, and eliminate the exemption for rural personal property.
All this requires strengthening coordination between levels of government by giving priority to a federal tax body that, as part of the sanctioning of a new law on tax sharing, updates the rules on tax analogies and characteristics of local taxes such as gross income and stamp duty , coordinates tax administration matters and helps simplify.
The establishment of a stable, efficient, fair, low-distortion and simple tax system capable of financing state activity is a debt of democracy. Let’s take advantage of this moment of crisis to rethink the ways that brought us here and apply a comprehensive reform that lays the foundations of a tax system which supports economic activity and helps reduce informality and inequality.
Source: Clarin
