Tax Advisers - Deloitte

Argentina
Argentina: time for
comprehensive reform?
Only five years have elapsed since the crisis that rocked
Argentina in late 2001 and early 2002, and yet the economic
outlook has now entirely changed in ways not even the most
optimistic forecaster could have predicted during those
difficult years.
The Argentine economy has recovered well since that time,
with GDP growing 9% on average each year, a growth that
is currently driven mainly by exports, construction,
manufacturing and financial activities. At the same time,
consumption is also stimulated by government spending and
social programs.
Despite concerns on several fronts, such as infrastructure
needs in the energy sector, fears of over-regulation and other
measures that would be required to enable sustainable
growth, economists and businessmen are increasingly
optimistic about the future performance of the country.
Tax revenues
Tax revenues in Argentina have increased sharply, as shown
in the chart below.
Diego Etchepare (top) The federal primary surplus that has been observed lately is
and Andrés Edelstein due to high value-added tax receipts and a strong
PricewaterhouseCoopers performance by income taxes, reflecting the recovery in
Buenos Aires
GDP and also a certain degree of success in the fight against
tax evasion and the informal economy.
However, this excellent performance is shadowed by the fact that the fiscal sustainability
greatly depends on a couple of distorting taxes, for example export duties and the tax on
financial transactions – tax on checks – and also on the lack of recognition of inflation
for tax purposes. Notwithstanding that corporate income tax and VAT are imposed at
relatively high rates (35% and 21% respectively), the breakdown of tax revenues shows
that the two main distorting taxes contribute 20% of the tax collection, and have been
playing an important role in the remarkable levels of tax revenues.
These circumstances, among other factors, explain why Argentina has performed poorly
in the recent survey conducted as part of the World Bank Doing Business report, Paying
Collection of taxes at federal level
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