Hand in hand with the dollar, the PAIS tax is gaining more and more weight in the Milei plan

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In February, tax collection it fell 11% in real terms compared to the same month of the previous year. The contraction in consumption and the decline in activity in a context of advanced inflation have reduced fiscal resources.

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But The collapse would have been even greater if it had not been for the PAIS tax. This tax, started at the beginning of the Alberto Fernández administration to make the purchase of dollars and spending in that currency more expensive, was extended with Sergio Massa as Minister of Imports and with the current administration the tariffs on purchases have been increased foreign countries, which has happened since 7.5% to 17.5%.

The PAIS tax rate is 30% in case of purchase of foreign currency, spending with debit and credit cards in foreign currency and tourist services abroad.

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Therefore, the PAIS tax has been registered an increase of 1439.6% year-over-year in February, representing a real increase of 302.3%. And with that it becomes more and more relevant in the fiscal surplus plan Javier Milei. In February 2023, in fact, it represented 1.7% of the total collected, while in August, after the first change in the tax, this percentage rose to 5.2%to finally reach 7.9% last month, specifies the consultancy firm ACM.

If this tax is excluded, Collection in February would have fallen by 16.5%, above the recorded decline of 10.9%. Therefore, “the growing weight that this tax has on public finances makes it difficult to jointly achieve two objectives that the government has set for this year: the elimination of the CEPO exchange rate and the fiscal balance“, mentions ACM.

Milei’s problem with the PAIS tax is that, being a tax considered distortive, The government has committed to the IMF to eliminate this tax by the end of the year.

At the same time, since it is a non-shared tax, Milei faces the problem pressure from governors They want this situation to be reversed so that they can keep a portion and thus compensate for the decrease in other shareable taxes.

“We hope so Revenues linked to the foreign sector continue to represent support of fiscal resources in 2024, even if this will imply an unequal distribution between the Nation and the Provinces”, underline LCG.

And they specify that “the collection of the PAIS tax and export duties will continue to grow much faster than others due to exchange rate correction, better harvest and higher tax base and rate in case of PAIS tax.”

On the contrary, “the stagnation of activity would directly influence the collection of the rest of the taxes, in particular the DGI VAT, while the collection of profits will be determined by the concrete possibility of reversing the reform introduced by the previous government”.

With this, LCG estimates that tax collection will be available 212 billion dollars in 2024“which would imply an average annual real decline of 19%.”

Source: Clarin

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