Nova workboard

a blog from young economists at Nova SBE

Argentina: New things will come

Argentina is one of the countries that paid most taxes in the world. The tax pressure its more than 40% than the average of the other countries of America Latina. Now a days the government its preparing a tax reform to be discuss in the congress the next year. They are discussing which will be the central issues to discuss and how to attack the problems that the country is facing with this matter.

At the time of the description of where Argentina stands in relation to the rest of the world, there are alarming conclusions. The country’s fiscal burden stands at 32% of GDP, surpassing by 40% the average level of Latin America and the Caribbean (which stands at 22.8%). At the same time, it is a level similar to that of the most developed countries in the world that make up the OECD (34.3%). It is confirmed with scientific evidence a popular saying: in Argentina so many taxes are paid as in Europe, but to receive services from the third world.

Nevertheless, one of the central problems that the government will have is the tax evasion. As tax evasion is much higher in Argentina than in developed countries, tax aliquots must necessarily be higher. In other words, it is necessary to charge more to the “few” that they tax. Also in Argentina the value added tax is from 21% and all only raises 7.2% of the gross domestic product. While for example in New Zealand the value added tax is of 15%, 6 points less than Argentina and raises 10% of the gross domestic product. The region average is 13% and at the global level is 15.7%. Being one of the taxes that more collect, it is very difficult to reduce the aliquot although it is one of the alternatives that at the moment studies the Minister of Finance, Nicholas Dujovne.

In Argentina, the companies paid 35% of taxes in their profit, while the majority of the countries in America Latina has an average of 28% and the global is 24.3%. This makes impossible for the foreign companies to invest in Argentina because its taxes are so high. On the other hand, regarding social work, the employer must pay between 23% and 27% additional on the salary in social security. That number drops to 13.3% in Latin America, almost half that in Argentina, while the global average stands at 17.4%.

The themes that are going to be discussed in the congress but the government are: reduce distortions and tax exemptions, attack evasion and tax avoidance, to encourage the formalization of the economy, review inefficient taxes and last of all the gradual establishment of reforms. Also I would like to add that during the last year after a long period the political right won the election. After a long time, Argentina is opening to the world, trying to bring new investments from foreign countries. We hope that in the years that come Argentina can become a world power as it was at some time ago.

Francisco Monpelat

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Author: studentnovasbe

Master student in Nova Sbe

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