I’m writing this quietly just in case I jinx it, but government representatives seem to have reached an agreement with the CGT union group on a bill to reform Argentina’s income tax, paving the way for the other political factions to get on board so that we can finally stop talking about taxes for at least, I don’t know, a week.
Government officials will today meet with governors to iron out the last remaining details and at 5 PM Cabinet Chief Marcos Peña will present the changes to Congress.
Even before the meeting, several governors were already counting on the bill getting passed. “The government has taken the right step. I believe that now the reaction has been positive. It wasn’t at the beginning, when they sent [their own project] right at the end of the year, without having reached consensus with governors and the CGT,” said Chubut Governor Mario Das Neves in an interview with Radio continental.
Salta Governor Juan Manuel Urtubey, on his end, happily said “we went down a path to find an alternative that won’t defund provinces.” This was a main concern among governors regarding the opposition’s project that was passed earlier this month.
The goal is to have the Senate’s budget committee approve the project and send it to the floor, where it would be debated tomorrow. If everything goes smoothly, it will get signed into law on Thursday, following the approval of two thirds of the Chamber of Deputies.
So, what will the specifics of the new tax structure look like?
- The bill puts the tax floor halfway between the administration’s and the opposition’s original proposals. The threshold is set at AR $37,000 for married people with two kids. For single people, anyone earning AR $27,941 and above will have to pay income tax.
- Overtime and double time pay on holidays will not be taxed. This was a main point of contention for unions, which caused yesterday’s transportation strike and made moving around the City and the Greater Buenos Aires practically impossible. 40 percent of overtime on regular workdays will not be taxed either, but the remaining 60 percent will. The case will be the same for commuting expenses.
- Those who have to pay income tax will be exempt from paying tax on the money from their income that goes to paying rent.
- The so called Aguinaldo — an extra half salary that is paid to workers in June and December, in accordance with Argentine labor law — will still be taxed, but in a way that is carried out throughout the year, rather than only on the months when it is received.
- There will be extra deductions of up to 22 percent for those who live in Patagonia due to the territory’s challenging [and expensive] living conditions.
- Only retirees who earn a pension higher than AR $40,000 will have to pay income tax.
Those affected are taxed over an established standard percentage of their income when it’s between the new floor — AR $37,000 for married taxpayers and AR $27,941 for single individuals, respectively — and AR $57,000.
But those who earn up to AR $20,000 more than AR $57,000 — the top of the first scale — will be taxed an extra 5 percent on this sum. In other words: they will have to pay the standard percentage on a part of their income up to AR $57,000 and the standard percentage plus an extra five percent on the difference. The percentages rise based on the level of income.
Those who earn between AR $20,000 and AR $40,000 over the tax floor will be taxed an extra 9 percent. Other scales are the following:
- Between AR $40,000 and AR $60,000: 12 percent
- Between AR $60,000 and AR $80,000: 15 percent
- Between AR $80,000 and AR $120,000: 19 percent
- Between AR $120,000 and AR $160,000: 23 percent
- Between AR $160,000 and AR $240,000: 27 percent
- Between AR $240,000 and AR $320,000: 31 percent
- Over AR $320,000: 35 percent
Scales and the tax floor will be modified automatically, in line with annual inflation, starting in 2018. The fiscal cost of between AR $5 and $8 billion will be financed by taxing the gambling industry and the extra income that comes from modifying the policy in a way that makes “the wealthier pay more”.