In his speech for the 214th anniversary of the May Revolution, President Javier Milei reiterated its commitment to move forward with tax reductions once the Bases Law and the tax reform are approved. The president said that the COUNTRY taxwhich weighs on the purchase of dollars through the exchange rate, will be the first to be eliminated.
“The Government will move forward with a significant tax reductionstarting with the PAIS tax, a tax distortive that threatens production and economic growth,” Milei stated before the crowd that listened to him in Córdoba.
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That tribute is inherent to the trap exchange rate, since it is applied as surcharge on the purchase of dollars officers. Therefore, eliminating it would be equivalent to lifting the restrictions on foreign currency operations.
Upon taking office, Milei extended the reach to all imports and raised some of the rates. In parallel, foreign trade operations that the previous administration had stopped due to lack of dollars began to be unblocked.
The Minister of Economy, Luis Caputo, was praised by the President during the May 25 event. (Photo: NA).
Thus, each product that enters Argentina pays the official exchange rate with a surcharge (17.5% in most cases). That decision led to the PAIS tax to collect prominence in public accounts During the last months.
According to PPI, The PAIS tax was the third item that most income contributed in April, since it represented more than 22% of the total. Estimates from private consulting firms indicate that this tax already represents between one and two points of GDP. For this reason, the President recognized that the decision to eliminate him “it will be difficult for the coffers of the national State.” However, he assured: “We make a commitment to the Argentine people and we are going to start returning taxes”.
While the public applauded and chanted for the Minister of Economy, Luis “Toto” Caputothe president described the head of the Treasury Palace as a “crack” and stressed that he is taming inflation.
The PAIS tax is applied to the purchase of dollars to pay for imports. (Photo: Télam).
“Just as we are attacking inflation, we committed to every weight collected that ends in a fiscal surplus will be returned to Argentines through tax reduction because there is no possible destiny for our nation if we do not remove the weight of the State from the shoulders of good Argentines,” said Milei.
Finally, the president highlighted that his government inherited “a bomb that combined the worst of the three worst crises in Argentine history: the Rodrigazothe hyperinflation of Alfonsín and the crisis of 2001″and stressed that he is doing “the larger fit not only of Argentine history, but of the history of humanity.”
Tax reform and adjustment of subsidies: the keys to eliminating the country tax
As reported TNprivate analysts agree that if the Government wants to fulfill its promise and get out of the trap as soon as possible, it will have to replace the PAIS tax contribution with other sources of income. In that sense, the sanction of the tax reform is key, which after being approved by the Chamber of Deputies, is still awaiting treatment in the Senate.
Also read: Tax reduction and May Council: Milei’s main phrases in Córdoba
According to a report from the Congressional Budget Office (CPO), if the profit reform The return of the tax to the fourth category is sanctioned and is in force during the last seven months of 2024 – that is, since May would have an impact of 0.3% of GDP.
The same work indicates that the changes to the simplified regime would have a positive impact (if they were in force all year round) on tax collection. Monotribute (+0.089%), social security system (+0.035%) and social works system (+0.097%), and negatively in Income Tax (-0.147%).
The Base Law was approved in the Deputies, but awaits treatment in the Senate. (Photo: Chamber of Deputies).
In addition to that, there will be some extraordinary income if the tax regulations are approved, such as those arising from the Whitening of capital and moratorium for tax debts. These items are more difficult for analysts to estimate, since they will depend on the conditions. For example, the externalization of assets will not have the same effect if it is done in an economy with exchange restrictions or without restrictions.
“The Earnings return helps a lot and, also, by removing the PAIS tax, the collection of other taxes can increase by reactivating the economy with the exit of the stocks. But we must continue to reduce spending on economic subsidies and we need to make a lot of adjustments there,” said the economist. Gabriel Caamanopartner of Outlierand remembered that There are still pending rate adjustments of residential users from lower-income sectors, in addition to the brake on increases ordered by the Government.
