The impact of the measures agreed with the IMF on taxation

The tax measures that were agreed in the agreement with the International Monetary Fund (IMF) are a mere staging in which both parties seem to be well aware of the meager objectives they are aiming at.

At the IMF, at least, they should sense it. There are too many years of a stormy relationship in which each one knows by heart the tricks of the other party. This means that none of the negotiators can be naive. But it is also necessary for the Fund's technicians to conclude some kind of agreement, even if it does not resolve anything. In the future, it will be possible to renegotiate with another government with which there is - at least - one valid partner.

These are generally inconsequential measures to make it appear, at least formally, that the Government is taking steps to balance public accounts, if only on the income side. A very typical action of this management: trying to sustain oneself, in a dangerous balance, without finishing complying with anyone.

In the following, I will outline some considerations about the measures being planned:

- The multiplication of the value of real estate in the Autonomous City of Buenos Aires to calculate the Personal Property Tax: in addition to being questionable from the legal point of view - it modifies an interpretation of the AFIP itself in 2018 - it further plunges the real estate market, which has been in hell for a long time, due to the unsuccessful “Rent Law”, by the successive crises and by the constant threats of new taxes (on idle housing, inheritance) issued by different sectors of government.

- With regard to actions to increase property valuations in the provinces, the picture does not seem to be encouraging enough for the Government either: it has failed on other occasions (this initiative was wrecked with the previous management, which sought to couple this incentive to a reduction in the gross revenue burden) and not we must forget that in many provinces (usually in the poorest, those that depend most on partnership) the political and economic establishment owns, directly or indirectly, a large part of these properties. Therefore, the incentives for properties to be subjected to multiple taxes (due to revaluations) are not too tempting for those who must approve them.

- The other tax announcements focus on increased audits, particularly in the high income and wealth sectors. However, without prejudice to the fact that the contribution to the total collection by audits is minimal (about 1%), how many anti-evasion plans have been approved in Congress since the return of democracy? We have seen this film too many times and, without exception, major plans with excessive powers for the AFIP have been approved (of doubtful or non-constitutional nature) that resulted in greater arbitrariness over taxpayers, but which had no impact on the collection.

- It is also planned to increase controls in the cryptocurrency sector: it is still an expression of wishes, since whoever owns this type of “blank” assets has already declared them to the tax authorities and taxing what is due. It will be difficult for those who deal in informality to stop doing so simply because the AFIP announces that it is going to start auditing. In fact, there are hardly any qualified personnel in the agency who know in detail this dynamic and elusive sector.

- Finally, the proposals in the agreement contain a corset for this government - and for whoever succeeds -, since they stipulate the impossibility of resorting to the sanction of fiscal amnesties while the loan is being canceled with the Fund. Beyond how undesirable these types of tax tools are, which are tax moratoriums and laundering (they horribly discourage the fiscal morality of the population), the truth is that - in order to give credibility to the country - at some point the tax system will have to be reformulated, shuffled and given again, so always, in those cases, with new rules - which were supposed to be maintained over time - resorted to the approval of such amnesties. They would also be an aid for the incoming government to transform a mass of stock (which loses value with inflation) into a stream of tax revenues in the event of a relative confidence.

I convey these reflections with great concern, as it seems that the measures have not gone through a minimum prior analysis of their practical consequences. I understand that some of them (taxes) would not only affect legal certainty, but also investment, but without improving tax revenues as has been announced in the media. What's more, I encourage myself to venture that none of the measures will cause even visible increases in revenue. Worse, the damage they cause is likely to end up affecting it, directly or indirectly.

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