Nicolas Perez - Oficina de Presupuesto del Congreso

EUROSOCIAL+ MEETING: POLITICAL AND SOCIAL PACTS FOR A NEW LATIN AMERICA. EQUITY, HUMAN RIGHTS AND DEMOCRACY

by Nicolas Perez | Jan 21, 2022 | Activities

On January 12, 13 and 14, the OPC participated in the Meeting “Political and Social Pacts for a new Latin America. Equity, Human Rights and Democracy” organized by the Democratic Governance Area of EUROsociAL in Valparaiso, Chile.

Leaders from different sectors and territorial levels of public systems shared their experiences on four topics: rights, accountability, territory, and taxation with the aim of facilitating the exchange of experiences, policy dialogue and the collective construction of alternatives.

María Eugenia David Du Mutel de Pierrepont – Director of Studies, Analysis and Evaluation and Carlos Guberman – Director of Tax Analysis were invited on behalf of the OPC and spoke on different panels along with other specialists from Latin America.

The European Union’s EUROsociAL Program has supported the reform agenda in the region for more than 15 years to improve social cohesion. The meeting created spaces for debate and reflection on what we imagine for Latin America in the next decade as a way of thinking about new political and social pacts anchored in equity, respect for human rights and the strengthening of democracy.

UPDATE ON THE FISCAL COST OF THE WEALTH TAX AMENDMENT BILL – DECEMBER 2021

by Nicolas Perez | Dec 29, 2021 | Cost Estimates

This report complements the analysis of the Wealth Tax amendment Bill S-2150/2021 in view of the changes introduced in the Chamber of Deputies.

The original Bill proposed to raise the minimum exemption to ARGENTINE PESOS EIGHT MILLION (ARS8,000,000) for taxable assets except for shares or participations in the capital of companies covered by the Law and to ARGENITNE PESOS FIFTY MILLION (ARS50,000,000) for real property destined to the residence of the taxpayer or deceased in an inheritance.

The most important changes with fiscal impact introduced are the creation of two new tax brackets for those who have taxable assets exceeding the non-taxable minimum between ARS100 million and ARS300 million, and another one for those who have more than ARS300 million (Section 3 of the Bill).

Additionally, as from fiscal year 2021, an additional tax rate on assets located abroad will be in force permanently (Section 4 of the Bill).

The usual methodology of the OPC considers as a basis for the calculation the text of the law in force, so that the enactment of Bill 70-S-2021 would generate net revenues for ARS85.787 billion during 2022, a figure that includes a drop as a result of the increase in the non-taxable minimum (MNI) and the increase in the value of dwelling houses that had already been approved by the Senate, and the increases in the tax rates introduced by Sections 3 and 4 of the text under analysis.

LOANS FROM INTERNATIONAL FINANCIAL INSTITUTIONS – 2021

by Nicolas Perez | Dec 28, 2021 | Public Debt

International Financial Institutions (IFIs) are an important source of financing for emerging countries, especially in times of crisis when access to debt markets is restricted.

The total stock of IFI loans to our country as of September 30, 2021, amounts to USD68.062 billion and represents 21% of gross public debt and 16% of GDP. Of the total amount, 63% is from the IMF, 19% from the IDB, 11% from the World Bank, 5% from CAF and 1% from other organizations.

Between 2005 and 2020, gross disbursements were received from IFIs for approximately USD83.574 billion, of which USD44.477 billion were from the 2018 SBA loan, USD19.731 billion from IDB loans, and USD12.299 billion from World Bank loans.

Of the total disbursements, excluding the IMF loan, 21% went to social development projects, 16% to roads and transportation, 8% to health, education, energy, and water supply and sanitation, respectively, and 7% to strengthening public management.

LOANS FROM INTERNATIONAL FINANCIAL INSTITUTIONS

ANALYSIS OF NATIONAL GOVERNMENT BUDGET RIGIDITIES – 2010 TO 2021

by Nicolas Perez | Dec 27, 2021 | Specific Budget Issues

Only 10% of the National Government expenditure has flexibility and can be reduced or reallocated. This proportion, over which the Government has the greatest margin of action, decreased in the last few years and currently the “fiscal space” -both in terms of expenditure and the allocation of resources in the budget- is very reduced.

From 2010 to 2021, rigid expenditures, mainly composed of pensions, wages, interest on debt, family allowances, among others, accounted for about two thirds of total expenditure (66.9%).
This segment of rigid expenditure reached a maximum of 80.0% in 2019 and a minimum of 57.9% in 2014.
The high rigidity expenditure component not only accounts for the largest share of total expenditure but has also been the most dynamic. It accounts for 84.0% of the growth recorded in the total National Government expenditure and between 2010 and 2010 its weight went from 19.8% to 25.5% of the Gross Domestic Product (GDP).
In 2021, expenditures with high rigidity affected approximately 63.6% of total expenditure; those classified as medium rigidity accounted for 24.8% and the remainder (11.5%) are those expenditures that are more feasible to reallocate.
Between 2010 and 2016, total expenditure grew 6.2 percentage points (p.p.) of GDP and, of this variation, 90% was explained by the growth of high rigidity expenditure.
Between 2015 and 2019, there was a sustained increase in the share of high rigidity expenditure, reaching an annual average of 72.9% of the total, while the weight of non-rigid and medium rigidity expenditure fell to an annual average of 11.1% and 16.0%, respectively.

The existence of budget rigidities limits the ability of fiscal policy to react to unexpected or new scenarios.

ANALYSIS OF NATIONAL GOVERNMENT BUDGET RIGIDITIES - 2010 TO 2021

TAX EXPENDITURES VS. FISCAL COSTS. INCOME TAX ALTERNATIVE ESTIMATES. THE NEED FOR A COMPLEMENTARY APPROACH – DECEMBER 2021

by Nicolas Perez | Dec 22, 2021 | Tax Policy and Fiscal Federalism

The exemption from Income Tax for registered employees under law 27,617 implies a reduction of ARS56.6 billion in annual revenues for the Treasury, which increases to ARS75.8 billion if the contributors of other provincial pension systems, armed forces and security forces are included.

It may be that the calculation includes a certain overestimation caused by the difficulty of accurately excluding members of the Judicial Branch who are exempted from income tax or the workers of Patagones, who are benefited with an increase in the special deduction.

It is clearly impossible to make inter-temporal comparisons of tax expenditures when these are estimated on a reference framework based on the regulations in force, in contexts of frequent regulatory changes, as is the case of Income Tax in Argentina in recent years.

Things change if we work on an ideal theoretical tax framework, as opposed to the legislation in force. The change in the basis of comparison could result in important differences: the fiscal cost of the promotional exemption of Tierra del Fuego increases from ARS7.3 billion to ARS13.2 billion and that of the amendment of Law 27,617 increases from ARS75.8 billion to ARS362.5 billion.

REPORT ON THE BILL FOR THE HYDROCARBON INVESTMENT PROMOTION REGIME – DECEMBER 2021

by Nicolas Perez | Dec 20, 2021 | Cost Estimates

Although the final fiscal impact of the proposed regime to promote investments in hydrocarbons will depend on the decisions made by the companies, on the macroeconomic evolution and on what happens in the domestic market, it is estimated that it could produce a positive balance of ARS21.384 billion per year for the Treasury, basically because of the increased revenue from the Tax on Fuels, which will no longer be a fixed amount.

Based on the assumption that fuel prices will increase 59% next year, an increased revenue of ARS9.964 billion per year is expected, to which ARS6.345 billion would be added because of export retentions.
On the other hand, the new regime could result in a loss of revenue for other concepts: ARS12.664 billion because of the exemption from Income Tax for the transfer of oil and gas areas and ARS3.1 billion for a new calculation of recording losses, a benefit which only involves YPF.
Half of the investments projected for 2022 would qualify for the import duty rebate, the fiscal cost of which is estimated at ARS2.2 billion.
Because of the type and volume of crude oil they process, PAE and YPF will have an additional benefit to access the regime’s incentives, particularly for exports.
With a maximum rate of 8% for Export Duties, the Treasury could lose ARS2.6 billion per year for each rate point in the next two decades.
The change in the Fixed Amount Fuel Tax per volume of carbon dioxide emissions will boost future increases in the price of crude oil at the pump, will affect competition and hinder control.
Furthermore, since they are more expensive, the less polluting gasoline and diesel will pay a higher Carbon Dioxide Tax than the more polluting products, completely distorting the purpose of the tax.
The initiative intends to make the Gas Plan, established by Necessity and Urgency decree until 2024, a law.