In March VAT collections reportedly fell by 18% year-on-year in real terms as a consequence of the decline in sales and the slowdown in activity. In the national accounts this is partially offset by the effect of the PAIS, but is mainly affected by transfers to the provinces since tax sharing is the most affected. The official data from the AFIP collection will be known on Wednesday.

An IARAF report anticipates that in March there were a real year-on-year decline of 42% in income tax and 18% – also excluding the effect of inflation – in VATthe tax directly linked to consumption.

“The recession is really very intense. The collection for March is already known and VAT has fallen by 18/19% in real terms. The decline is very strong. At the moment, The Nation doesn’t realize it because it takes advantage of the collection of the Country Tax“, said economist Jorge Vasconcelos, of the Mediterranean Foundation.

Relative to the month of February, the joint collection of VAT and profit (which represents 54% of the overall national collection) would have decreased by 11.6% in real terms.

The commitment of Javier Milei With a zero deficit, it is supported by spending cuts – liquefaction and chainsawing – but also requires tax revenues to defeat the recession. So far this year this has not happened.

The impact of the PAIS tax

In February, collections decreased in real terms by 11% compared to the same month of the previous year. 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. it went from 7.5% to 17.5%.

The rate of NATIONAL tax It is equal to 30% in case of purchases of dollars, expenses with debit and credit cards in foreign currency and tourist services abroad. Therefore, the PAIS tax recorded an increase of 1,439.6% year-on-year in February, which represents a real increase of 302.3%. And with that it becomes more and more relevant in the fiscal surplus plan.

A year ago the PAIS represented 1.7% of the total collected while, in August 2023, after the first change to the tax, this percentage rose to 5.2% to finally reach 7.9% in February, details the consultancy firm ACM.

The drop in profits and VAT directly affects the provinces. The fact is that, unlike PAIS taxes, these are two sharing taxes. According to the IARAF, as a form of partnership, the national government sent more CABA to the consolidated provinces in March $2,110,000 million, compared to $724,000 million sent in the same period the previous year. That means, a nominal change of 191% was observed.

Without the effect of inflation “This would translate to a real decline of about 26%.”

The consultancy firm LCG hopes that “Collection linked to the foreign sector continues to support fiscal resources in 2024, even if this will imply an unequal distribution between the Nation and the Provinces. PAIS tax and export duty collection will continue to grow well above the rest due to exchange rate correction, better harvest and a higher tax base and rate in case of tax PAIS.”

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

The wage reform, in fact, is one of the points of negotiation between the national government and the Provinces, which are pushing to expand the universe of workers reached and thus making up for part of the revenue sharing that governors are losing.

For the full year, LCG estimates that tax collection will be ongoing 212 billion dollarswhich implies a decline of 19% real average per year.