The real estate revaluation of Batakis will have a limited impact

In a press conference, Monday 11 July, the new Minister of Economy Silvina Batakis announced an anti-crisis program with ten measures aimed at “ensuring budget balance”. One of these is the migration of the Federal Property Assessment Agency (OFeVI) to the Ministry of Economy, presumably to homogenize the evaluations which currently meet the criteria dissimilar from each province and from the Autonomous City of Buenos Aires (CABA).

Immediately, the market has interpreted an impending increase in personal property tax (ISBP) as a result of this measure. Surely this is what it is aimed at, but what would be the purpose of inclusion in an anti-crisis program?

Do some history The Federal Agency for Real Estate Valuation (OFeVI) was created in October 2018 by Decree 938/2018, in response to the Fiscal Consent of 11/16/2017 (Law 27,429). There, the nation state has undertaken, among other things, to have a federal body with the participation of the provinces and the CABA, which determines the procedures and methodologies of application for all jurisdictions in order to ensure that the assessments property taxes tend to reflect the reality of the real estate market and territorial dynamics.

Decree 938/2018 considered it appropriate to create OFeVI in the orbit of the Secretariat of the Provinces and Municipalities of the Ministry of the Interior, in order to determine the methods and application methodologies for the tax assessments of properties in the territory of adhesion provinces to the consent .

Shortly after, in December 2018, Law 27.480 introduced some changes to the ISBP. One of these was to contemplate the values ​​established by OFeVI as a minimum valuation of the properties located in the country. In the meantime, it has been established that the floor would be the current tax assessment as at 31/12/2017, which will be updated taking into account the change in the CPI.

This organism, which until now has never worked -OFeVI-, that’s what Minister Batakis ordered to change ministry (from the Interior to the Economy).

In the context in which it was announced, A higher tax burden on real estate within the ISBP can be expected. The question that arises is whether it will be an effective remedy to the crisis.

It cannot be avoided that the tax assessments of properties in the provinces and in the CABA are delayed. compared to the market value. In other words, that value serving as a “plan” for the ISBP currently does not meet the target to correctly assess the ability to pay against this tax.

However, It should not be forgotten that this value is the floor, which will be taken only when the purchase value (according to deed or ticket) or the construction value (according to material and labor invoices) of the property, after deducting the accumulated depreciation of the property, be less than that.

Having said it, Without much effort, it is noted that the planned measure will have a limited impact.

Unfortunately, nothing announced was accompanied by economic projections, the deadlines for correcting financial distortions, Therefore, the specific effects cannot be known. expected from this alleged “anti-crisis” measure, nor from the entire program.

At this point it cannot be ignored that the ISBP increased considerably at the end of last year, when Law 27,677 added two tranches to the tariff scale and did not change the fixed values ​​that make up each tranche, which date back to December 2018 (Law 27,480). In this inflationary context, not updating the amounts that define each band is equivalent to increasing the tax, given that the “minimum” valuations of the properties are increased by the CPI. The update of the minimum non-taxable amount does not cover this distortion.

Seen in this way, an increase in the tax on illiquid goods (difficult to convert into money) and which – by definition – generate a low annual income (about 3% per annum in Argentina), does not appear a priori as a sensible measure, even less when the maximum tax rate can be 1.75% on goods in the country.

It cannot be ignored that the ISBP has a slight impact on receipts. And it is natural that this happens, because this tax is levied on assets, not on income. Consequently, it does not seem to be effective as a solution to the economic crisis that our country is going through.

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