Argentina’s 3 tax curses

Photo Ivan Cachanosky
Ivan Cachanosky

Lic. in Business Administration. Master in Applied Economics of the UCA. PhD in Economics from the UCA.

CATOAccording to Iván Cachanosky, 84% of the Argentines surveyed consider that taxes are high or too high, 80% think that the tax system is unfair and 66% that taxes are spent inefficiently.

The first is linked to dissatisfaction with tax pressure, the second refers to the perception of fairness of taxes and the last one is linked to the efficiency of the use of tax resources.

There is no doubt that the reality of taxation in Argentina is not encouraging. The diagnosis usually includes a certain consensus on high public spending being a problem. Said spending must be financed, which is why in the last 20 years an increase in the level of taxes has been observed, even if Argentina’s fiscal deficit remains high. However, it is worth asking ourselves about the tolerance threshold of Argentines in relation to the taxes they pay.

Fundación Libertad y Progreso has prepared a nationwide survey to try to answer this question. With this information, we developed the Index of Citizen Satisfaction with Taxes. From the answers obtained, we can conclude that there are three great tax curses that Argentines suffers.

The first curse is linked to dissatisfaction with tax pressure. 84% of Argentines surveyed consider that taxes are high or very high. On the contrary, only 4% perceive taxes in Argentina as low. This answer is about perception, not necessarily reality. And in this context, the numbers are not encouraging at all

On the other hand, the second curse refers to the perception of justice surrounding taxes. 8 out of 10 Argentines surveyed consider that the tax system is unfair. This number is shocking, since there are several reasons for the system to be considered unfair from the perspective of those surveyed. For example, taxes are unfair because they are very high compared to other countries, or because the tax revenue is not used efficiently, or because they see them exclusively as a collection instrument that maintains the privileges of politicians, among others.

As for the third curse, it is linked to the efficiency of the use of tax resources. 66% of those surveyed said that the way in which the State uses the money collected from taxes is bad or very bad. In other words, the perception is not only that taxes are high, but also that this enormous amount of resources are misused. Some issues can be seen easily, such as the evident deterioration of public hospitals or the very low performance in international educational evaluations, for example, the PISA test. Specifically, most believe that a lot of money is spent and badly.

As if this were not enough, the scenario worsens if we carry out an intertemporal analysis. When respondents were asked about what happened in 2021 and future prospects, concerns grow. 79% of those surveyed agreed that taxes will increase this year. In addition, 68% believe that taxes will continue to increase in the future. This perception makes the outlook bleaker because we are not only worrying about spending right now, but about the trend continuing.

The great conclusion of the survey is that Argentines are saying “Enough!” to tax increase. We can also conclude that the concerns are not only linked exclusively to a high tax pressure, but also to an unethical perception of taxes, since 81% consider that this level of taxes is unfair. Finally, the perception is that this vicious circle will grow in the future.

It would be important for politicians and legislators to take note of what Argentines are revealing to us in this survey. It is no longer just the country that cries out for structural reforms, but also the population understands that the solution cannot come through tax increases. Given that Argentina has structural imbalances, the solutions must also be of a structural nature to correct the path of decline.

It would be important for politicians and legislators to take into account what this survey has revealed about Argentines. We are no longer just the country that cries out for structural reforms. The population understands that the solution cannot come through tax increases. Given that Argentina has structural imbalances, the solutions must also be of a structural nature to correct the path of decline.

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