The mechanism is very tempting for a State in need of money to let it pass: do nothing and collect more. Any logic would say that in an inflationary country, in order for the spirit of the tax laws to be maintained over time, their calculation parameters should be updated at the rate of price increases.
But in Argentina, the authorities defy reasonableness and rearrange the texts for their best convenience. That is why they prefer to avoid the corset of automatic updates based on objective indicators and replace it with discretionary modifications.
Non-taxable minimums, exempt amounts, deductions, billing limits and tax rates should follow inflation to maintain the weight of the levies as approved by Congress. But if these variables are not modified or rise less than prices, the tax pressure increases in two ways: more taxpayers are reached and those who already paid taxes pay more.
A known vice
The most resounding case of the last two decades was that of the Income Tax. The deductions and the aliquot scale that had been frozen in convertibility did not have an automatic adjustment when inflationary inertia returned, but rather discretionary changes that the Government granted to the fluctuation of its resources or its political needs.
This issue was corrected when an annual update was established by law in the 2017 reform. Although the indicator is not perfect (it is adjusted by wages instead of by prices), it is a great advance and by 2021 the variables increase 35.38 percent.
But in other taxes the same did not happen and the authorities took advantage of the regulatory gaps so that inflation increases the tax pressure. Three examples of this are the Monotax, the Personal Property tax and employer contributions.
Hit the little ones
What is happening these days with the simplified regime shows neglect or an intention to complicate the life of the monotributistas.
This month the semi-annual recategorization of the Monotax expires (extended until January 31 from the original 20). For this procedure, the billing limits of the categories and of the exclusion should be updated automatically based on the 2020 pension mobility, from the first day of the year. As mobility was suspended, the Afip interpreted that it cannot update the tables by resolution and needs a law. This has been known for more than a year, but just a couple of weeks ago the bill was sent to Congress to adjust the amounts.
As the initiative has not yet been discussed, monotributistas will have to be re-categorized with the outdated values of 2020 and, if they are excluded by less than 25 percent, then carry out a procedure to qualify for the benefits provided by the bill, at the time it is approved.
In the case of the Personal Property tax, in addition to the sharp increase in rates in the 2019 period that was paid last year, for fiscal year 2020 neither the non-taxable minimum (it was two million), nor the housing was updated. only exempt, nor the aliquot scales.
And in the employer contributions paid by employers, at the end of 2019 the inflation update of the non-taxable minimum was also suspended (in addition to other benefits, which had been set in 2017) and was replaced by an intricate system of fixed amounts and aliquots differentiated by size and activity of the employer. As everything is discretionary, you have to wait to see what values will be applied in 2021.