Dujovne and Sandleris travel to Washington to negotiate tax adjustment

Finance Minister Nicolás Dujovne and Central Bank President Guido Sandleris travel to Washington on Tuesday to attend the annual meeting of the International Monetary Fund and the World Bank. But what appears to be a protocol presence will actually include Key Management to Support Government Plans in the Months to Come.

As has happened in recent hours, the goal of moving the two most influential economic leaders in the United States is: negotiate the postponement of the application of tax adjustment measures requested by the IMF.

The idea is to get an extension until October, so its impact does not affect the performance of the ruling party at the polls.

Last week, the IMF's board of directors approved the release of US $ 10,800 million for Argentina as part of its financial badistance plan.

But the fact was more than a simple procedure. The third review of the economy's progress made by the Fund is accompanied by harsh criticisms and recommendations. achieve above all the budgetary objectives set out in the agreement.

The actual drop in tax collection, which has been several months below the rise in inflation, seems the main concern of the IMF and this is where he stressed his claims.

The Fund's document also stressed that "the Argentine government has shown its determination to ensure that the public debt-to-GDP ratio is sustainable, thus reducing the 2018 primary deficit below the target set in the program". .

But the financial agency also clarified that "given the lower than expected level of tax revenue in the first half, it will be essential to act on a continuous basis caution in the execution of spending plans and take other measures to increase tax revenues so that the fiscal situation of 2019 reaches the primary balance ".

In this context, "it is necessary to redouble efforts to improve the fiscal framework and debt management in the medium term," said the IMF.

In other words, the international organization has focused on subsidy reduction policy and, of course, has asked for greater efficiency in tax collection.

Fund Orders

The reality emerging from the latest revision of the Fund is that the agency has sufficient reserves vis-à-vis Argentina and, as a result, projected tax revenues for 2019 have been revised downward. "The disappointing tax revenues of recent months suggest that the weak economic activity and the difficulties of the administration to collect the taxes render the previous forecasts optimistic", says the organization in a document released Friday after the publication of the amount of 10,800 million US dollars.

As a result, projected revenues for 2019 have been reduced by 1.7 percent of GDP.

Fund staff even recommended emergency measures should tax revenues continue to fall.. According to the agency, the Argentinian authorities pointed out that, given the limited room for maneuver during the election year, capital expenditure reductions are probably the only option. Staff recommended that measures be identified to strengthen the tax problem.

These, as suggested by the Fund, could include:

– Larger reductions in economic subsidies.

– The elimination of a series of tax exemptions.

– an increase in VAT applied to certain goods and services.

– Improve tax compliance.

"However, the authorities believe that these measures require unrealistic legislative changes in an election year," warns the newspaper.

According to the IMF, for the government, the counterpart is that new measures are already under study to improve compliance with tax obligations in the medium term. "The plan is a structural reference point for June 2019 and must include measures to address the main shortcomings of the tax administration," says the credit agency.

The problem for the Treasury is that the IMF's new tax package can be inflammatory for a change in electoral terms.

In this context of conflict, the official program of the two leaders includes various meetings with investors and financial institutions, but it will be with the directors of the Fund itself that decisive discussions will take place.

Among them, Christine Lagarde, Alejandro Werner, Director General of the Western Hemisphere; and Roberto Cardarelli, who recently led the IMF mission to the country.

Before them, Dujovne and Sandleris will seek to show how the Argentine government has managed to overcome the financial crisis of last year and to is on track to comply with what had been agreed with the IMF, namely to obtain a budget balance in its accounts this year.

"The policies of the authorities that support the IMF-backed agreement are bearing fruit," the agency said, warning that "however, inflation remains high, inflation expectations are rising, and inflation is on the rise." inflationary inertia is hard to break. "

"High budget and current account deficits – two major vulnerabilities that led to the financial crisis of last year – are shrinking," Lagarde said in a statement.

He also said that "economic activity has contracted in 2018, but there are indications that the recession is at a low and a gradual recovery is expected in the coming quarters."

The agency also noted the rebound in financial volatility in recent weeks, "as global financial conditions have become less favorable."

In any case, he felt that "the BCRA reacted to this situation by recalibrating its monetary policy by keeping the monetary growth at zero until the end of the year", while "… a new charter of the central bank was submitted to Congress. being approved as a law will strengthen the credibility of monetary policy, "he said.

Discover the latest news in the digital economy, startups, fintech, business innovation and blockchain. CLICK HERE