In 2022, there has been much debate about the tax burden and the sustainability of the Argentine tax system. In an election year like 2023, it is to be expected that this debate will increase and enrich society. “From the answers that are collected each year, it can be deduced that the success of a tax reform that focuses on productivity and development is quite unlikely without a reading of this tax and reducing the overlapping of provincial collection regimes. ”, says Fernando Quiroga Lafargue, KPMG Corporate Tax Partner in Argentina and responsible for the survey.
The conclusions of this year’s survey offer an authoritative vision when dealing with references of leading companies whose investment decisions can be significant in terms of growth, employment and economic formalization. It also deepens the perception that companies have regarding the performance of tax authorities and justice in the tax field. The sample has 3 thematic chapters: 1) Tax pressure received. Incidence in prices and investment plans of the companies, 2) Role of administrative and judicial organisms; and 3) Outlook for 2023.
Tax pressure received. Incidence on prices and investment plans of companies
-Taxes: 52% of those surveyed responded that Gross Income continues to be the tax that most impacted the prices of products and services in 2022. It is followed by Profits (19.64%). In this way, the Tax on Gross Income is consolidated year after year in the absolute leadership of the taxes that make the prices and services of companies more expensive.
– Investments: In the majority opinion of those surveyed (96.43%), it is observed that the Argentine tax framework either forced them to divest or, in the best of cases, allowed them to “maintain” the investments already made. Only 3.57% stated that they had developed an expansion plan in terms of investment in 2022. In line with the latest surveys, the percentage of those who state that they have been forced to divest as a result of the fiscal framework continues to be very high and constant. (fifty%).
– Profits: Discounting the effect of inflation, a third (34%) of those consulted expect to have a result subject to tax greater than 2021 in the next Affidavit of 2022 (it is done in May 2023 for the December closings). Another third believe they determine a lower tax result than last year (32%) and 9% estimate to present a tax profit the same as in 2021. Finally, 25% of those consulted stated that they report tax losses for the year 2022. Of the group that estimates tax losses for the year 2022, 21% returned from declaring profits in 2021.
– Tax regulations: More than 90% of the responses agreed that the tax regulations are not published with a sufficient level of study and prior consensus between public bodies and business chambers for their proper implementation. This is both at the national and provincial levels. “A greater articulation between officials and Business Chambers and professional associations could help to reverse this problem that affects today the certainty that who intends to comply with their tax obligations should have,” explains Quiroga Lafargue.
– Prices: The interviewees were asked, if it were possible to set differential prices by jurisdiction, in which Provinces should sell their products and services more expensive given the fiscal framework of each one. And the Province of Buenos Aires continues to top the list of fiscal pressure that affects the determination of the prices of products and services. CABA follows. The novelty in this year’s survey has been the irruption of Misiones and Tucumán. Although the two states had already been leading the group of provinces behind the first 3, this year they have even displaced Córdoba to fifth place. Faced with the question of whether the company restricted the sale of goods or services in any jurisdiction due to the provincial tax pressure, 80% of the answers were negative. Misiones was the most voted among those who did restrict sales. “This is an example of how the provincial fiscal pressure ends up limiting the supply of goods and services that its own residents have access to,” he adds.
– Balances in favor of taxes: 82% of those consulted have balances in favor of provincial taxes of various magnitudes. The generalization of this type of financial immobilization for companies is highly detrimental. According to the results that we see year after year, the existence of these problems has been deepening and even naturalizing. The multiplicity of provincial collection regimes on transactions, often duplicated when also applied to bank accreditations, has generalized what for many companies constitutes one of the main problems of the country’s tax regime.
– Incentives: When asked about which incentive tax measures served for economic development, the Knowledge Industry was the most recognized with 57%. In industrial activity and in those linked to exports, the identification of this type of measure made by the respondents is low, 18% and 17%, respectively. Even lower is the look when it comes to identifying tax measures that act as an incentive for financial inclusion objectives of the population with 5.36%. 94.64% specifically state that they do not recognize incentive measures. “In the case of key activities in the sustainable development of the country’s economy, these opinions show how much remains to be done in these aspects for the future,” explains Quiroga Lafargue.
Role of administrative and judicial bodies
– Objectivity. As every year, the opinions of tax agencies or administrative or judicial courts (AFIP, AGIP, ARBA, National Tax Court (FN), Provincial Justice and Supreme Court of Justice of the Nation (CSJN)) on matters of objectivity and with a rating range from 1 to 10. The Supreme Court of Justice of the Nation achieved the highest rating with 6.64, followed by the Tax Court of the Nation with 6.09. At the other extreme, justice in the tax area of the Provinces was weighted with 4.70. Regarding the opinions about the role of the AFIP due to the objectivity of its officials, it shows a gradual evolution within an intermediate qualification. In 2019 it was 4.44; in 2020 of 4.64; in 2021 of 5.06 and in 2022 of 5.25. The AGIP (Buenos Aires City Revenue) remained in an intermediate range since last year (5.18) while in the case of ARBA (Buenos Aires Province Revenue) the appreciation of objectivity on the part of the companies it continues to be lower with a rating of 4.07.
Outlook for 2023
– Tax pressure: 83.93% of those consulted affirmed that in 2023 the fiscal pressure canceled on the businesses of the companies. The pessimistic view of those surveyed regarding the worsening of the fiscal pressure on the economy has remained very high in the last 5 years. “The worsening that is expected in terms of tax pressure for this year added to the high percentage of respondents who indicated that in 2022 the tax pressure had led them to a situation of disinvestment, should be a powerful warning signal for the economic authorities as well as for the economic teams of those who aim to be elected to executive functions in this year’s electoral process”, says Quiroga Lafargue on this topic. Even in the face of this scenario of greater tax pressure for 2023, 64.29% of those surveyed plan to maintain their investment in the country; and 30.36% expressed their intention to reduce their investment.
– Provinces. 98% of those surveyed believe that there is little or no interest on the part of the provinces to use tax incentives to attract productive investments to their territories.
u Predictability. Regarding possible government tax initiatives in 2023 that could favor investments, respondents ranked the following priorities:
- Establish a framework of fiscal predictability for 10 years without increases in national and provincial taxes:
- Significant reduction of Gross Income Tax rates
- Reductions in employer costs
- Total consideration of Tax on Debits and Credits as payment on account of Income Tax and VAT
- Count on greater objectivity of the provincial tax authorities and the provincial justice in the tax area
- Tax simplification in procedures, registrations, records and other formal aspects before the tax authorities
- Reduction of tax costs for access to local and international financing
- Add Agreements to avoid double taxation with other countries
The initiative most voted for by those surveyed to facilitate investment in Argentina does not, however, imply a tax reduction but at least have a predictability horizon of 10 years without increases in national and provincial severity. Secondly, those surveyed voted as a relevant initiative the significant attenuation of the rates of the Tax on Gross Income. And thirdly, they express the need to reduce employer costs to expand their payroll.
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