Taxes are, to use a local phrase un tema in Argentina. There is a tax for using checks, a 21% value added tax (compared to a world average of 15.6%). Argentines pay Gross Receipts or a Turnover tax, one of the world’s “most economically harmful tax structures,” involving taxing all business sales as opposed to just the final sale, without discounting taxes paid at the previous stage. More than 54 percent of the value of a car is taxes, making Argentine cars the most expensive in the region. Company tax is set at 35 percent, compared to a regional average of 27 percent. Throw on top of that the fact that a reported 40 percent of the final price of food is tax.
It all adds up. Argentines pay almost as many taxes as countries with the most developed economies in world, as President of Tax Policy at the Argentine Industrial Union (UIA), Carlos Abeledo, pointed out at a recent conference. According to figures from the organization tax is 34 percent of GDP, in line with OECD standards (34.4), and 10 points higher than the average in Latin America.
In some ways, this sounds like a victory. After all, taxes are integral to a harmonious, well-functioning society, enabling growth, peace, opportunity and safety. But critics would be quick to point out that Argentina isn’t Sweden. Roads, schools and hospitals lack investment. Public infrastructure continues to be a serious issue. 9 out of 10 Argentines are scared of being the victim of crime. Leaving many to question just where exactly all the money they pay in tax ends up going.
The cost is high and it’s the consumer who generally picks up the check of an over stretched State. Taking an example from La Nacion, let’s consider the bakery owner who needs to hire a security guard because of crime and insecurity in his neighborhood. Obviously, somebody needs to pay the security guards salary, and the panadero isn’t going to take that dough (dad joke for the win!) out of his own pocket. Instead, it’s tacked onto the price of bread.
Of course, taxes don’t stay stagnant numbers on spreadsheets. Taxes also shape reality, influencing the way consumers and producers make decisions or go about their daily affairs. The check tax – originally introduced as a temporary measure after the 2001 crisis – incentivizes people to pay cash under the table instead of writing a more offical check. The “cascading” Gross Receipts tax changes the structure of businesses, who are encouraged to “vertically integrate” (when one company expands its operations into different parts in the supply chain, e.g. a food manufacturer and a supermarket.)
Argentina’s tax regime is also hurting industry, according to the Argentine Industrial Union (UIA). “Tax pressure is taking away the possibility of creating more jobs, profits have collapsed and that’s not something that has happened in recent months,” said Adrián Kaufmann Brea, president of UIA, at the 22nd Annual UIA Conference, a two day event attended by 1500 industrials and public luminaries.