Nicolas Perez - Oficina de Presupuesto del Congreso

FISCAL IMPACT OF BILLS ON PENSION BENEFIT ADJUSTMENT – REPORT OF PROPUESTA REPUBLICANA (PRO)

by Nicolas Perez | May 15, 2024 | Cost Estimates

This report complements the report published by the OPC on May 2, 2024, entitled “Fiscal impact of bills on pension benefit adjustment – Reports from the Committee on Social Security ”1 and includes the Report submitted by Propuesta Republicana (PRO).

For the purpose of estimating the fiscal impact of each Committee Report, a comparison is made between the pension benefit adjustment formula being proposed in each bill and the adjustment formula in force, approved by Decree of Necessity and Urgency (DNU) 274/24. Likewise, a comparison is made with the formula in force up to March of the current year, established by Law 27,609.

The analysis is based on the macroeconomic assumptions made by the Ministry of Economy for the fiscal year, considering that the new regulation would be applied as from May. The formula under Law 27,609, was applied from January to March, and the one provided for by DNU 274/24 was applied in April.

The formula provided for in the bill establishes an expenditure equivalent to 7.21% of GDP (including bonuses), which would imply 0.38 p.p. more than the formula under Law 27,609 and 0.07 p.p. more than with the formula of DNU 274/24. In addition, the bill requires the National Executive Branch to cover the fiscal cost associated with the measures provided by means of a reduction in tax expenditures, as established in Section 2 of Regulatory Decree 1,731/2004.

FISCAL IMPACT OF BILL ON THE EXTENSION OF THE INCOME COMPENSATION FUND FOR COTTON PRODUCTION

by Nicolas Perez | May 14, 2024 | Cost Estimates

ERRATA: This report replaces the version published on 05/14/24.
The bill extends the term of the Income Compensation Fund for Cotton Production (FCIPA), increases its budget and proposes an automatic annual update linked to the price of grade 2 diesel oil determined by YPF.

Resources totaling ARS13.5 billion would be allocated to the FCIPA this year.
The Cotton Fund was first included in the budget in 2006, but without a credit allocation. As of 2007 a budget of ARS25 million was allocated and ARS500 million in fiscal year 2024, which has not been executed to date.
Updates will be made on an annual basis, according to the percentage difference in the variation of the price of GRADE 2 diesel oil determined by YPF S.A. as of September 30 of each calendar year.

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – APRIL 2024

by Nicolas Perez | May 8, 2024 | Budget Execution

The financial result for April was positive by ARS0.2 trillion, so that the first four months of the year recorded a surplus of ARS0.8 trillion, which contrasts with the deficit of ARS1.9 trillion obtained in 2023.

The cumulative primary surplus totaled ARS3.9 trillion, compared to a negative result of ARS1 trillion a year earlier. Also in April, the primary result was positive by ARS0.5 trillion.
Revenues had a real decrease of 2.8% year-on-year (YoY), as the increases in the PAIS Tax (431.3% YoY) and Export Duties (69.1% YoY) failed to offset the decrease in Social Security resources
(-21.6% YoY).
Total expenditure fell 28.6% YoY, with real decreases in all items except for interest payments, which rose 2.0% YoY.
Pension expenditure contracted 28.5% YoY, but given its high incidence in the total, it contributed 10.2 points to the overall drop.
Capital expenditures recorded a negative variation of 80.8% YoY in the four-month period, as did current transfers to provinces (-85.4% YoY).
For the first time in April, energy subsidies increased (44.5% YoY), mainly due to transfers to CAMMESA (electricity) for ARS791.76 billion. However, in the cumulative amount up to April 2024, energy subsidies show a negative variation of 40.6% YoY.
Between January and April, the National Government spent ARS21.4 trillion, 39.1% of the budget appropriation. Transfers to universities (51.7%), non-contributory pensions (51.3%) and family allowances (50.7%) stand out for their high level of expenditure execution.

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – APRIL 2024

FISCAL IMPACT OF BILL 0666-D-2024 ON FAMILY ALLOWANCES UPDATE

by Nicolas Perez | May 6, 2024 | Cost Estimates

The bill proposes a monthly update of family allowances and benefits such as Alimentar and those for minors who are victims of violence on the basis of the CPI, which up to now have been adjusted using the pension benefit adjustment formula.

The proposal would imply an expenditure equivalent to 1.23% of GDP, above the expenditure that would result from the extension of Law 27,609 or the application of DNU 274/24.

The adjustments are calculated with the proposed mechanism as from May and the CPI would always be that of the previous two months.

At the end of 2024, the recipients of benefits for children and adolescents would receive higher amounts if Law 27,609 were extended, with the exception of the Alimentar Benefit, the amount of which is defined by the Executive Branch.
With the formula provided for in the bill, family allowances and the programs under the Brisa Law would lag behind the increases they would have with the extension of Law 27,609 or the application of DNU274/24 until the end of the year.
Universal allowances (Universal Child Allowance – AUH -, and Universal Pregnancy Allowance – AUE -) would have an improvement in purchasing power due to the increase in their amount provided in January, but to a lesser extent than with the extension of Law 27,609 or DNU274/24.
The Alimentar benefit would improve with respect to inflation (contrary to the assumption of keeping it fixed).

As all formulas include adjustments based on the inflation of previous periods, a scenario of price deceleration would contribute to an increase in real terms. But other variables such as salaries and ANSES revenues may have a different impact.

FISCAL IMPACT OF BILLS ON PENSION BENEFIT ADJUSTMENT – REPORTS FROM THE COMMITTEE ON SOCIAL SECURITY

by Nicolas Perez | May 2, 2024 | Cost Estimates

This report analyzes the fiscal impact of four bills proposing amendments for the pension benefit adjustment formula currently in force, based on the reports of the Committee on Social Security of the Chamber of Deputies.

For the purpose of estimating the fiscal impact of each Committee Report, a comparison is made between the pension benefit adjustment formula being proposed in each bill and the adjustment formula in force, approved by Decree of Necessity and Urgency (DNU) 274/24. Likewise, a comparison is made with the formula in force up to March of the current year, established by Law 27,609.

The analysis is based on the macroeconomic assumptions made by the Ministry of Economy for the fiscal year, considering that the new regulation would be applied as from May. The formula under Law 27,609, was applied from January to March, and the one provided for by DNU 274/24 was applied in April.

BILL 0005-PE-2024 ON PALLIATIVE AND RELEVANT TAX MEASURES

by Nicolas Perez | Apr 24, 2024 | Cost Estimates

The fiscal impact of the proposed tax amendments included in the Bill on Palliative and Relevant Tax Measures was estimated on the basis of the theoretical tax determined for the year 2024 and based on a macroeconomic scenario based on the most recent projections of the Ministry of Economy available to the OPC.

Due to the impossibility of anticipating taxpayers’ decisions, the fiscal impact of the Exceptional Regularization Regime for Tax, Customs and Social Security Obligations and the Asset Regularization Regime could not be estimated.
The reform of the Wealth Tax would reduce the burden of this tax in a range of 0.29% to 0.61% of GDP, depending on the fiscal year and the assumptions considered.
The abolition of the Real Estate Transfer Tax would have a theoretical estimated impact of 0.0161% the GDP for the 2024 fiscal year and 0.125% the GDP assuming an eight-month impact during 2024.
The income tax reform would increase revenues from this tax by 0.5004% of GDP based on the full fiscal year 2024. The increase would be 0.3004% assuming an application of seven months during 2024.
The reform of the Simplified Regime would have a positive impact on the collection of the Monotributo (Simplified Regime for Small Taxpayers) (+0.0888%), Social Security System (+0.0351%) and the Social Security Healthcare System (+0.0967%), and a negative impact on the Income Tax (-0.1474%).