As revenue falls below inflation, tax burden in Argentina shifts from agro-exporters to consumers.
The Argentine Federal Revenue Agency (AFIP) reported that federal revenues in June rose by 24% from the same time a year ago, for a total of 174.6 billion pesos ($12.3 billion).
The figure is an improvement from May, when revenues rose by a meager 17.9% over a year earlier; but for the fifth straight month they fell far short of inflation, which according to the Economy Ministry at the City of Buenos Aires (whose mayor is a close ally of right-wing President Mauricio Macri), reached 44.5% in May.
Assuming yearly inflation in June remained the same (it is likely higher, given the preliminary data), federal revenues thus fell by 14% in real terms and by 21% in dollar terms over June 2015.
AFIP Director Alberto Abad justified the shortfall by pointing out that "we are seeing the effects of the tax cuts and all the other changes made;" but admitted that "with economic activity flat and consumption falling, revenue collections followed accordingly."
The report also revealed that trends differed widely among the major federal revenue streams. Social security contributions rose 37.3% to 42.5 billion pesos ($3 billion); value-added taxes, by 38.2% to 33.3 billion pesos ($2.4 billion); and wealth taxes (assets and accounts), by 41.2% to 14.4 billion pesos ($1 billion).
Income tax revenue rose by a disappointing 13.8% to 49 billion pesos ($3.5 billion) however. This represented a 21% reduction in real terms, the result of Macri tax cuts mostly benefiting those earning over 30,000 pesos ($2,100) a month - nearly twice the median full-time income in Argentina - as well as a sharp fall in real incomes themselves of at least 11%.
This reduction nevertheless paled in comparison with the one enjoyed by exporters, whose witholdings plummeted by 52.6% to 4.9 billion pesos ($350 million) - the lowest figure, in dollar terms, in a decade. The Macri administration sharply reduced withholding taxes on most grain and oilseed exports by decree the day after taking office seven months ago.
The aim was to incentivize agricultural exports, which were 18% higher during the first half of 2016 ($13.3 billion, or 42% of the total) than the same time last year. Central Bank data, however, suggest that the additional $2 billion in exports were mostly wired abroad, since capital flight actually increased to $3 billion last quarter.
Import taxes, on the other hand, jumped by 64.1% to 4.7 billion pesos ($330 million) due to Macri's devaluation (which raised the cost of imports in pesos by over 50%) as well as higher import volumes as a result of free trade policies. Local manufacturers have cut output by around 5% since the beginning of the year, with many industry managers citing both flat demand and rising imports as causes.
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