Tax revenue soars 37.5 percent in January
for the Herald
High collection provides further evidence of a growing inflation rate in the first month of 2014The country’s tax revenue soared 37.5 percent in January from a year earlier, a higher-than-usual number that provides further evidence that consumer prices saw a sharp rise in the first month of the year, marked 10 days ago by the largest devaluation of the peso since 2002.
Collection exceeded expectations as AFIP tax bureau chief Ricardo Echegaray said rising export duties brought relief to public accounts. At the same time though there was a sharp decrease in grain and oilseed sales abroad, illustrating concerns by the government over farmers hoarding their produce as a way to guard against devaluation and inflation.
Tax revenue rose to 90.3 billion pesos from 65.683 billion pesos, the taxman said in a news conference yesterday, in line with his prediction last week of boosted collection compared to recent months.
Both Echegaray and Treasury Secretary Juan Carlos Pezoa defined the boost in collection as a record for a first month of the year and a “positive economic development.”
Prices have risen between 25 percent and 30 percent over the past 12 months, according to private consultancies, which publish their data through lawmakers, driving up nominal gains in taxes — particularly the VAT, for which revenue rose 42.3 percent to 27.221 billion pesos — and public spending.
The Value-Added Tax thus made up a third of cash flowing into state coffers as result of tributary mechanisms, as consumers were hit by price increases despite the newly implemented price agreement with supermarkets and suppliers.
Eased foreign currency exchange restrictions and a parallel 15 percent plunge in the peso during the week of January 20 led to widespread uncertainty over further depreciation and thereby surging prices.
Some consumer goods were reported to have been increased as much as 30 percent, although several retailers later rolled back their prices following an agreement with the government that capped price hikes for products with a large number of imported components at 7.5 percent.
Speculators also flocked to purchase goods such as air conditioning units under the prospect of re-selling at a higher price while further devaluation remained a possibility.
IDESA consultancy economist Jorge Colina maintained that “January has been a month marked by significant price adjustments.”
“The rising inflation seen in the last few months, with 28 percent in December, was fed further by the devaluation.”
For his part, University of Buenos Aires economist Mariano Kestelboim told the Herald that the “acceleration in the rate of devaluation was 10 days ago,” and thereby only had an impact on a third of the month.
“The rise in the level of tax collection responds to three factors: inflation, a greater level of (economic) activity and greater efficiency by AFIP in collection mechanisms,” he added.
Revenue vs. inflation
AFIP’s relatively sturdy data has tended to remain on par with unofficial and provincially-run inflation indices, suggesting the 37.5 percent hike last month will likely reflect a strong increase in inflation.
Whether or not the government’s imminent inflation report for January will reflect such developments remains uncertain. On paper, a move away from the INDEC statistic bureau’s notoriously unreliable price figures should be seen, considering the application of an IMF-friendly consumer price index methodology reform that involves the use of federal data, rather than prices mainly in the Buenos Aires area.
Although the hike in revenue was largely driven by VAT, a significant boost of 31.4 percent was also seen in social security contributions, which still accounted for the main bulk of collection at 28.176 billion pesos. In January last year, the category clocked in 21.442 billion pesos in revenue.
The amount collected through the income tax, which is applied only to citizens earning 15,000 pesos or more per month, was the third biggest source of funds, increasing 46.9 percent to 18.372 billion pesos from January last year.
The soybean struggle
The government’s claim that soy farmers are hoarding more of the oilseed than usual as part of speculation over further devaluation was seemingly reinforced by AFIP’s data, which reported a 52.2 percent drop in revenue from grain export duties in January compared to the same month of 2013. The figure plunged from 732 million pesos to 350 million.
In terms of volumes exported, soy pellets actually surged by 138 percent but soybeans plunged 74.9 percent and soy oil went up by eight percent.
The seeds and fruit category also suffered a 32.5-percent loss, dropping to 44 million pesos.
A notable boost was seen in cash injected from “residues and waste from food industries,” which soared 229.1 percent to 1.631 billion pesos.
“Export fees were very strong,” Echegaray noted, emphasizing a total 34.7-percent hike in funding collected from duties, weighing in at a total of 4.005 billion pesos.