The government is preparing to begin debate on the 2024 budget. The Treasury Department is currently finalizing details to submit the bill to Congress, whose parliamentary consideration could be delayed due to the election situation.
The primary fiscal deficit estimated in next year’s budget proposal is 0.9 percent of GDP. However, “the administration invites Congress to make an effort to review the group of economic benefits for companies and sectors in order to achieve in 2024 a year-end GDP surplus of 1 point.”
These are so-called tax expenses and tax advantages, such as the exemption from judges’ profits, the Tierra del Fuego regime, various reduced tax rates and untaxed profits and others. All of these situations would represent a collection loss of 4.72 percent of GDP.
“The adoption of laws to reduce tax spending is a way to strengthen public sector resources, allocate more resources to the development of priority public policies and consolidate a robust primary result with surpluses,” claims the Palacio de Hacienda. This is an initiative aimed at meeting the IMF’s demands but preventing the adjustment from affecting pensions, salaries of public employees and public works.
Expenses and services
In parallel with the 2024 budget project, the government proposes “the review of a series of expenses and tax advantages that various companies and sectors have and that cause the State to lose revenues equivalent to almost 4.72 percent of GDP per year.” Here These are various tax advantages, different treatments and budgetary subsidies, which particularly favor large companies and corporations and have a significant negative impact on the sustainability of public finances, leading to permanent losses of revenue.
The issues on which economic management focuses include: the judges of national and regional judicial authorities (0.16 percent of GDP), profits of civil associations, foundations, mutuals and cooperatives (0.11 percent), reduced VAT rates (0, 62 percent), the economic development regime for the province of Tierra del Fuego (0.33 percent).
Tax expenses are the income that is withdrawn from the treasury through a different tax treatment that is more favorable than for the rest of taxpayers. In addition, there is a second group of tax benefits that have a negative impact on the budget.
Suggestion
Economía proposes a series of changes to Congress to reduce the burden of tax expenditures and tax benefits. This list includes the exemption of rural properties from personal property tax, which accounts for 0.48 percent of GDP. “The appropriateness of maintaining the validity of this exemption should be subject to a legislative assessment in light of the contribution capacity, its profitability and access to other benefits in the form of subsidies and promotions,” says Economía.
As for the corporate sector, the portfolio led by Massa proposes to “draw attention to the exemption from VAT that falls on the fees of directors of companies, which will represent 0.29 percent of GDP in 2024”. The document also reminds that ADRs will be taxed at 7 percent income tax instead of the general tax rate (35 percent).
