Alberto Fernández Unveils Economic Package to Overturn Argentina's Financial Crisis

On Tuesday, Argentina's Finance Minister Martín Guzmán presented the bill that the new government sent to Congress to be passed before the end of the year. Guzmán announced a new 30% tax on all dollar purchases inside the country, including the monthly 200 dollars allowed by the current quota.

This will be added to the already announced 30% tax on purchases of goods and services made abroad and other payments related to outbound tourism. The proceeds will be used to finance social security (70%) and infrastructure and housing (30%).

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The agricultural sector will also be affected by the project promoted by the Fernández administration. Less than a week after the taxes were raised, they will be subject to a new adjustment. Under this new plan, the tax on soybeans will be increased to 33%, while wheat and corn will be increased to 15%, although Guzmán explained that the modifications are subject to "dialogue".

As LPO anticipated, the rates on personal property will return to those of 2015 -between 0.5% and 1.25% depending on the value of the property, but will maintain the minimum taxable of $2 million pesos and $18 million for the property destined to housing.

The tax package is completed with a curb on the reduction of employer contributions, since "the reduction of labor taxes has always been ineffective in our country as a policy of job creation, an extension to six periods to enter the difference in the adjustment of corporate balance sheets for inflation, the suspension of the reduction of the rate of corporate income, which will be 30%, and a tax on cash withdrawals for large companies" as an incentive for the formalization of the economy.

"If we do nothing, the tax problems will get worse. We can't allow the deficit to grow because we don't have a way to finance it and the monetary issue can generate imbalances," Guzmán stated. He added that it is precisely this "care for the fiscal situation" that will stabilize inflation and prevent this virtual exchange rate split from being transferred to prices.

Among the measures that seek to "protect the most vulnerable sectors" and reverse "the fall of the economy", the payment of two $5,000 bonds - one in December and the other in January - to retirees who receive the minimum wage, stands out. In principle, the rest of the retirees would be affected by the suspension of the mobility formula for 180 days just when a significant increase should be validated due to the high inflation in recent quarters. This will be subject to the will of the Executive, which through this project will have the power to set quarterly increases "that will give priority to the lowest income sectors".

At the same time, public service tariffs will be maintained for another six months until the comprehensive tariff review is renegotiated with the companies, VAT will be refunded to " affected sectors" - without specifying what this regime will be like - and a plan will be launched to regularize tax, social security and customs debts "to address the situation of small and medium enterprises that have not managed to sustain compliance with their obligations".