This week, the Government will propose a major tax reform in Congress that could have significant implications for high-paid salaried workers. According to Chief of Staff Guillermo Francos, reinstating Income Tax on Profits and Personal Assets is crucial for provincial finances and to combat money laundering.
The IARAF report estimates that the change in Profits tax would result in an additional burden of 0.5% of annual GDP, or $3,100,000 million. Since profits tax is co-participatory, with 60% going to provinces and CABA and 40% to the Nation, the potential impact of the reform varies across different regions.
Provinces like Tierra del Fuego, Catamarca, and Formosa stand to benefit most from the distribution of tax proceeds, while CABA, Buenos Aires, and Mendoza would receive less. On average, provinces could see an additional transfer of $67,500 per year. However, variations depending on the province could be significant.
Governors must carefully assess the overall impact of the tax reform on their provinces before implementing it. For example, Catamarca stands to receive an extra income of $110 million per year per inhabitant from both the extra income from the tax reform and its population size. This additional income far outweighs any extra tax burden that Catamarcan residents would face under this new measure.
Overall, reinstating Income Tax on Profits and Personal Assets seems like a sound financial move for provinces across Argentina. Governors must weigh up its benefits against any potential drawbacks before making a final decision on whether to support it or not.