The Macri administration got to breathe a sigh of relief last night when it managed to prevent the opposition’s income tax bill from getting enough votes in the Senate’s budget special committee to be sent to the floor.
How did they make the recovery when everything seemed so lost? By exercising pressure on the governors, who hold a great deal of influence over their province’s senators. The income tax is “co-participatory,” meaning it is collected by both the federal government and by the provinces. By informing the governors about the massive fiscal cost this reform would implicate the Macri camp was about to gather enough support to get this victory.
It is a partial victory though. In order to remove the bill from today’s session, the opposition lead by the Victory Front (FpV) and the Renewal Front (FR) demanded all involved parties — governors, the CGT umbrella union representing workers, all political parties with representation in Congress and Executive Branch officials — sit down at a both the metaphorical and literal “dialogue table” in order to draft a bill that satisfies everyone involved.
By finding middle ground between its project and the opposition’s, the government will still have to face a fiscal cost it didn’t foresee, but the upsides outweigh the downs. It will probably save a large part of this massive cost, and in terms of optics managed to avoid what it would have been a massive political defeat.
Negotiations have already begun and, according to Clarín, there have even been contacts between government officials and Sergio Massa, involved during the past days in a verbal clash with the Macri administration — Macri at one point calling Massa an “impostor” — for having spearheaded the opposition’s project.
After yesterday’s events, it can be concluded that most governors who are not part of the Cambiemos ruling coalition will also support the government’s initiative. In fact, at least nine of them have publicly spoken against it, criticizing the massive fiscal cost it would have for provinces. A report from the executive director of AFIP, Argentina’s tax collecting agency, Alberto Abad that concluded that provinces would effectively lose AR $64 billion should the bill go through. These findings have had led many leaders within provincial government to distance themselves from the proposal. The message from the Casa Rosada announcing that it would give less money to provinces and slash resources for public works also contributed to a growing resistance to the bill within sectors of the provincial government.
- Read more: Political Defeat For The Government: Opposition Comes Together, Passes Its Own Income Tax Reform Bill
“To move forward with this project would be to deepen the de-financing of the provincial coffers,” Salta Governor Juan Manuel Urtubey said yesterday. The only one who openly supported the opposition’s initiative was Chubut Governor Mario Das Neves.
Moreover, Labor Minister Jorge Triaca got together with the members of the triumvirate that heads the CGT yesterday afternoon. Macri’s administration intends to draft a new bill from scratch and vote on it next week, so there’s no time to waste.
Should this initiative not go through, however, Clarín reports the administration is considering backing a proposal from Salta Senator Rodolfo Urtubey, which would have a lower fiscal cost, while raising the tax floor without taxing mining and gambling sectors.
What it is certain though is that the Macri administration will do everything in its power to make sure Massa’s project doesn’t go through. Yesterday it managed to avoid having it get debated today, the opposition could present it again if it considers the tides have changed. That’s why Interior Minister Rogelio Frigerio met yesterday with the economy ministers of 22 jurisdictions — the City of Buenos aires and 21 provinces — and got all of them to express their disapproval of the project.
It will be a frenetic week in all sectors of the political spectrum and, considering how much of a roller coaster everything related to this project has been, it’s almost impossible to predict the final outcome.