Argentina is tax more expensive than Africa, the Middle East, and South America

INFOBAE – The Deputy Chief of Cabinet, Cecilia Todesca, said at the weekend: “The idea that taxes are first lowered and then investments arrive does not work” and added: “It was already tried with Macri and we ended up with an underfunded state”.

Clearly, the official does not seem to take into account that investments are not only a function of the tax burden, but also of stability in the rules of the game, legal security, labor legislation, regulations, the existence of currency. , of a capital market, etc. In short, the weakness of the argument of the deputy chief of staff is striking.

In any case, a simple example shows that lowering taxes produces incentives to increase production. During Macri’s government, export restrictions were eliminated and taxes on cereal and meat complexes were lowered. As a result of this, the production of corn, which was a terrible business in the K era, increased 70%, that of wheat, which was barely enough to supply the domestic market, grew 42% and exports of beef, which were at USD 1,046 million in 2015 they reached USD 4,032 million 4 years later. Investments are not only a function of the tax burden, but also of stability in the rules of the game, legal security, labor legislation, regulations, the existence of currency, of a capital market

In the government of Cristina Fernández de Kirchner, meat paid 15% withholdings, but also to obtain the ROE (Registry of Export Operations) it was necessary to sell cheap meat to the domestic market. As a result of this policy, meat exports fell, many meat processing plants closed and 20,000 jobs were lost.

So with the elimination of withholdings and regulations alone, there was a phenomenal increase in grain production and meat exports that multiplied by four.

Heavy bibliography

But, in addition, it seems that Cecilia Todesca is unaware of the tax burden and the complexity of the Argentine tax system. The first data to consider are the taxes paid by companies in Argentina at the three levels of government: nation, provinces and municipalities. As is known, there are 166 taxes: 42 national, 41 provincial and 83 municipal taxes, according to the survey made by the director of Iaraf, Nadín Argañaraz.

But already in 2004, the great Rosario economist and tax expert, Antonio Margariti, said: “If you want to know the tax laws that apply to you to be a good taxpayer, you have to resort to specialized books. The publishing house La Ley, for example, has published them under the title “Taxes” in 25 volumes. In other words, the current tax laws that govern all taxpayers are contained in 25 volumes of 1,290 pages each. In total, 32,250 pages. If an ordinary person starts to read them to find out their tax obligations, it would take four years. But in that period, another 25 updated volumes will have been released and, therefore, it would always be out of date. ” As can be seen, a prominent specialist in tax issues admits how complex the system is to be able to comply. A director of the AFIP said: “If I strictly enforce the Argentine tax system, it would generate social chaos because it would have to close countless SMEs that they could not comply with existing regulations “A director of the AFIP said:” If I strictly enforce the Argentine tax system, it would generate social chaos because it would have to close countless SMEs that could not comply with existing regulations “

Furthermore, many years ago the director of the AFIP invited me to lunch because we had had a friendly discussion on the radio about the tax system. And he recognized that if he strictly enforced the Argentine tax system, it would generate social chaos because he would have to close countless SMEs that could not comply with existing regulations. Literally the Argentine tax system was and is unenforceable. And even the officials themselves know that.

It is enough to read the tax procedure law to warn that the taxpayer is defenseless before the State. Taking this law to the absurdity, it could be said that a tax official “can be shot at dawn, in the main square and without prior trial” if so ordered by the AFIP.

Argentina the three levels of the state (nation, provinces and municipalities) keep 106% of a company’s profits, the average for the Middle East and North Africa is 39.1%; and Sub-Saharan Africa rises to 48.2% of declared profits.

If it is compared with South America, exclusively, Argentina is also the most expensive tax, considering, in addition, that the work still does not take the tax incentives that Uruguay has just implemented.

But, on the other hand, the Argentine tax system is so complex that companies require advisers in the matter and it can be estimated that, working 8 hours a day, a company has to allocate 39 business days to settle the taxes established by the Argentine treasury to Despite certain simplifications that were established in the Cambiemos era, although in the K era 57 days were allocated. Almost two months of work to determine the amount of taxes to be paid, it should not be surprising that informal work is so high

With these data it should not be surprising that informal work is so high. Any small company cannot bear that tax burden and cannot bear the cost of paying so many different taxes. The system rejects all those who wish to enter the formal market.

If you combine the phenomenal tax burden on companies, how expensive and cumbersome it is to pay taxes with the instability in the rules of the game, legal insecurity and the lack of respect for property rights, regulations and anti-company discourse, no It should be surprising that the number of companies that want to leave the country is growing, that structural poverty has grown to alarming levels, that unemployment is a constant concern, and that the average Argentine is tired of working for the State to support planeros and public employees in industrial quantities.

After looking at this data, it seems quite evident that the deputy chief of staff has not had to deal with paying taxes, managing personnel, complying with regulations and other obstacles that anyone who wants to establish a business and create jobs must face.

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