Before resorting to the last drastic measure to put a halt to the opposition’s income tax reform bill – the sacred veto, Macri’s Administration is first pulling out all the stops to put pressure on the country’s provincial governors. By using the governors’ influence over senators, they hope to be able to stop the bill in its tracks.
The bill, which was approved in Congress on Wednesday night with 140 votes in favour and 86 against, will be evaluated in the Senate next week and, if accepted, could become law. Macri’s Government is therefore counting on support within the Upper House in order to avoid having to use its vetoing power, which would somewhat undermine the desired image as a democratic party.
In particular, the Government is relying on the influence that governors belonging to the Justicialist Party (PJ), Argentina’s largest Peronist party, could have on a key group of senators.
“We’re appealing to the reasonableness of those who have executive obligations,” said government spokespeople, and they warned that they would speak “with everyone”.
According to Clarín, despite being in China, the Interior Minister Rogelio Frigerio has begun communicating with the governors. Among others, his deputy, Sebastián García de Luca, is assisting him in this task.
So, how are they attempting to secure support from the governors? By threatening them with scary-looking numbers.
Macri has already informed the governors of the PJ, who supported the bill in Congress, that if this initiative is not modified in the Senate there will be a potential net tax loss of AR $7 billion for both the provinces and the national Treasury in funds currently allocated to provincial public works and services.
7 billion pesos? Why? What? How?
Well, according to the figures presented by Frigerio’s ministry, the decision voted through by the Lower House could have a total fiscal impact of over AR $65.5 billion. The 2017 budget envisaged an AR $27 billion cost for financing the original Income Tax Reform, agreed with the provinces. Therefore, the net loss would amount to over AR $38.5 billion, of which the State would absorb almost 19 billion and the provinces, almost 19 billion.
Their calculations then dictate that the new additional taxes suggested by the bill approved in Congress on Wednesday would collect about AR $25 billion, which would be halved between the State and the provinces, 12 billion and 13 billion respectively. So, you do the math, that’s how the net loss would come to AR $7 billion each.