From: Andrés Edelstein AND Juan Mariscal , Partner of the Edelstein, Mariscal, Torassa y Asoc firm.
The Executive Power has once again presented a bill that promotes various tax measures and which, although it replaces the one presented at the beginning of the administration, maintains its main objectives.
A large number of tax-related issues require and require immediate attention, and the project seeks to resolve the most considered ones urgent and essentialand at the same time lay the foundations for a future global tax reform.
As a first measure, a broad moratorium (called “Regime for the regularization of tax, customs and social security obligations”), in which debts to the treasury up to 31 March 2024 can be cancelled up to 84 installmentsdepending on the type of taxpayer, and with interest reduction of up to 70%, depending on the date of joining. This moratorium, based on the economic context that the country has been experiencing for years, can be an alternative for many taxpayers to catch up with their tax obligations and remain in the formal sector.
Subsequently it is proposed to Asset regularization regime (commonly called “recycling”) whose primary objective seems to be linked to the need to do so formalize the small saver (up to 100,000 dollars have no cost), both to strengthen the financial system, since not even funds deposited in banks or intended for certain investments and held until December 2025 will pay the special tax. For the rest of the goods the rate varies between 5% and 15% of the tax base, depending on the stage of accession to the special regime.
As in the case of moratoriums, these asset regularization regimes are generally exceptional and are applied in certain particular circumstances, given their characteristics harmful effects in the medium and long term (they lower tax morale, they are complex, all types of taxpayers can access them with a certain reputational risk, etc.). However, a country whose economic actors are used to living with permanent economic instability, exchange rate gaps and a significant informal economy, among other aspects, seem to justify this type of extraordinary measures. Any estimate that takes as a reference the significant mass of assets that Argentines hold outside the local financial system and in an irregular situation from a fiscal point of view, but without a doubt The country’s political and economic expectations in the medium and long term will be decisive for the success of this measure.
Regarding the tax on Personal propertyas a tax that taxes goods at rates currently among the highest in international comparison (and which have been the cause, although not exclusive, of numerous changes of residence in recent years)we believe it is correct to gradually reduce the tax burden as proposed by the project, taking it from rates of 2.25% to 1.5% for this year’s maturities, up to 0.25% starting in 2027eliminating existing discrimination for foreign goods and offering an advantage to compliant taxpayers.
As a complement, we propose a Special income tax regime (“REIBP”), which allows the unitary payment of the tax for the periods from 2023 (2024 for those adhering to anti-money laundering) to 2027 inclusive, with reduced rates of 0.45 or 0.50% for each tax period, just in case. We understand it may be attractive to some taxpayers who expect growth in wealth and/or want greater fiscal certainty regarding property taxation, since the regime also guarantees fiscal stability until 2038.
About Income tax, changes to personal deductions mean that gross wages under $1,800,000 for single individuals and $2,300,000 for married individuals with two children continue to fall outside the scope of the tax. Likewise, important changes in the tariff scale, trying to recover part of the progressivity that the bond lost years ago. In both cases (deductions and rates), the improvement will also be reflected in the self employed, albeit to a lesser extent due to the differential existing in the so-called “special deduction”. This scheme, more in line with the guidelines applied in most countries, will be updated starting from 2025 with the change in the CPI, without prejudice to the right that the Executive will have to introduce adjustments during the current year.
Likewise, in a new research attempt horizontal equity (those who have a similar ability to pay under similar conditions pay the same burden) it is proposed to repeal every type of differential treatment that the tax has contemplated in recent years.
About Simplified Scheme for Small Taxpayers (“Single Tax”), We propose not only important changes in the monetary parameters currently in force that establish the different categories, but also the possibility that this will happen service providers can access the highest, hitherto prohibited. In return, significant increases in the monthly cost of the scheme are observed, both in the tax and social security and social components, in what appears to be an attempt to reduce the fiscal gap currently existing between the monotax regime and the generation regimel, especially for the new cases covered (service providers of the last three categories).
Other measures of lesser impact but relevant from the point of view of the tax system, such as the repeal of the Real Estate Transfer Tax for human persons, fiscal transparency for the consumer, or the ban on bank withholdings for some taxpayers, accompany the project that addresses current issues (moratorium, recycling, personal assets) but at the same time addresses more structural aspects, such as the case of income tax.
As mentioned in its foundations, we must not lose sight of the fact that in the course of the year 2024 the National Executive will present a comprehensive reform of the tax system in order to simplify it, achieve an increase in the base of registered taxpayers and begin to reduce the pressure tax.
This comprehensive tax reform, which must consider the existing budget constraints and the fiscal objectives that this government has prioritized to organize the macroeconomy, presents enormous challenges ahead: an intricate and complex tax regime, lack of generalization in the tax base ( with exemptions, deductions and differential treatments on profits and VAT), hidden and economy-distorting taxes that contribute a significant percentage to the collection (export duties, gross income, check tax), to the detriment of more efficient taxes, to name some of the problems to be solved to achieve the proposed objectives.
Taking into account the very particular context we are experiencing and beyond the comments and opinions that each of the proposed measures may deserve, in general terms the project achieves a reasonable balance, address issues of urgent and pressing concern with a good dose of pragmatism, while providing some signals on the future reform that we intend to undertake.
Source: Clarin
