A more competitive tax system: the big challenge

Strictly speaking, such an ambitious goal implies for the Mercosur member countries (and Argentina in particular) a challenge in areas such as productivity, education, taxes, infrastructure, safety and security. legal, etc.

A free trade agreement of this magnitude means that our country is working in each of these areas as quickly as possible. For the first time, it seems like an ambitious goal requires us to evolve on all these fronts if society wants to achieve the much-needed development.

Taxation is undoubtedly a determining factor for competitiveness and productivity, both in the SME universe and in that of large companies. It is essential that tax policy be seen not just as a collection tool but, to a greater extent, as a stimulus for the development of different sectors.

Our tax system has been modified over the years without maintaining a series of long term goals. Today, the agenda proposed under this agreement could require us, as a society, to think about the tax system that allows us to achieve a free trade scenario with sufficient competitive advantages.

We know that Argentina's tax burden is one of the highest in Latin America and only slightly below the European average.

According to the latest data from the Ministry of Public Revenue, the year 2018 generated a consolidated tax burden of 29% of GDP, including national and provincial taxes. Only 17.5% of total national and provincial taxes collected correspond to income tax. Indirect taxes (defined as those who perceive manifestations of indirect contributory capacity over the flow of wealth or consumption) are, among others, gross provincial income, VAT, export duties and taxes. interior. In 2018, this tax clbad accounted for 37% of the National and Provincial revenues of the Product (excluding net VAT as it does not represent a cost to companies). In addition, payroll taxes accounted for 22% of the total tax burden.

The difference is that, in European Union countries, the tax burden relies to a greater extent on progressive taxes such as income tax and, to a much lesser extent, on income tax. indirect taxes.

Specifically, indirect taxes in Argentina are an important part of the consolidated collection between countries, provinces and municipalities. The accumulation of indirect taxes on different manifestations of consumption or pseudo-fiscal capacity ultimately undermines the profitability of firms and, if possible, their transfer, they become a hidden cost of the exported product or service that ends by undermining the competitiveness of local economies compared to other economies.

In 2008, the World Bank devoted a special chapter to the tax burden in Argentina. At that time, it was proven that the taxes that most affected the cost of a local SME were the gross income tax and the debit and bank credit tax.

According to the aforementioned study, in 2008, these two taxes accounted for 63% of the total tax cost of an Argentine SME company. Precisely, these taxes erode the utility that the company can finally get from the market, since they fail to be transferred in the cost of the product being sold.

The same World Bank badysis concludes that EU countries derive their taxes from their direct taxes (income tax) and from their taxes on wages, which allows indirect taxes not to be part of the cost. goods and services. services. In fact, the indirect taxes of the average tax systems of the European Union countries do not exceed 2% of the total cost of taxes of the sample company selected for badysis.

The study in question has also revealed over the years a collateral consequence no less. Global communication and information technology and systems have allowed tax systems to begin converging on new efficiency standards, as never before. In addition, they compete for investment. From 2004 to 2019, this multilateral agency found that, in general, many countries have eliminated indirect taxes in cascade (similar to gross income), have adopted a technology facilitating the collection and improving the productivity of taxpayers during the preparation and the provision. sworn declarations and, finally, reduced the corporate tax rate.

Our country has the opportunity to work on tax reform organized in the context of the international concert, which can at least to some extent improve the productivity of their companies.

(*) Partner of the taxes and transactions department of EY Argentina.