December 6, 2013
Revenue growth may be slowing down
In the last month before the application of the income tax floor hike announced last week, tax collections rose 25 percent, to 75.86 billion pesos in August compared to the same month last year.
The new income tax floor of 15,000 pesos that came into effect this month will not dent the state’s coffers, but the last four months have shown that a plateau may have been reached.
“For several months now we have surpassed the 70-billion-peso mark, and we fully believe we can uphold this position until the end of the year,” AFIP head Ricardo Echegaray said confidently, presenting the figures.
The total amount collected in taxes in the first eight months of the year increased 28.1 percent, when compared to the January-August period last year, to 563.1 billion pesos.
The total revenue collected marked a decrease from July, however, when the taxman collected a record 80.298 billion pesos. The drop rounded off a four-month plateau in monthly revenue, with an average of 77.154 billion pesos collected each month, which were preceded by four months in the 60-billion range.
With the majority of think tanks consistently reporting inflation rates of approximately 20 percent, increases in tax revenue have become the norm, but the recurring trend could see a sharp change this month with the implementation of the income tax floor hike announced by President Cristina Fernández de Kirchner last week.
As of Sunday, the estimated 25 percent of the 9,333,917 registered workers paying income tax dropped down to 10 percent, or 955,527 persons in formal employment.
Without making reference to the loss of a key slice of federal taxation, Echegaray led a news conference to present the statistics, stating that “this is extremely positive in this context and shows the evolution of the Argentine economy,” while Treasury Secretary Juan Carlos Pezoa argued that last month’s “figures of growth show the strength of the economy.”
Perhaps more interesting than the inter-annual monthly comparison for August is that the month saw smaller growth than the 28.1 percent median that was recorded in the first months of the year, José Anchorena, an economist for the PRO’s Fundación Pensar, told the Herald.
“This could mean that revenue growth could begin to decline,” he added.
However, Anchorena played down the effect of the income tax floor rise: “Ninety percent of income tax payers are companies, and only two million are physical persons, which would mean that you would only cease to collect about one billion pesos,” as the majority of such firms have monthly profits above the new minimum barrier of 15,000 pesos.
The economist attributed growth in general collection to inflation and “slightly to a rise in economic activity.”
“If inflation was at 15 percent, I would have said they improved revenue collection, but the figures are very similar to annual inflation,” he said.
Income tax was the third highest source of income for the government, providing 15.661 billion pesos, up 27.9 percent. The value-added tax (VAT) injected the highest amount with 22.341 billion pesos, 32.1 percent more than the same month last year.
The second most important tax category was social security, which accounted for 18.492 billion pesos, meaning a hike of 27.6 percent.
Echegaray reiterated that the government would meet its target of 820 billion pesos for the year.