This is the tax reform that the industry demands from the Government

Promote new investments and employment; expand credit for production; recover exports; reactivate the demand from state contributions; promoting technology and industry 4.0, and developing SMEs and regional economies are some of the claims that industrial they caught up with the president Alberto Fernández to revive the post pandemic economy.

The requests form part of an extensive document that the Argentine Industrial Union (UIA) sent to the Head of State by email under the title “Towards a new normality: proposals for productive reactivation”

The 75-page report is distributed in five aspects. In the first, an executive summary is published; in the second, the global impact of the Covid pandemic19 is analyzed, while in the third, the situation of Argentina facing the new scenario is analyzed.

The fourth item talks about the need to build consensus and agreements for the growth of the country and the fifth and last chapter develops the proposals to sustain and reactivate economic activity.

“The Covid-19 pandemic will leave strong consequences at the global and local levels, in an unprecedented international context with two distinctive features. On the one hand, it is a recession comparable to the one that occurred with the Second World War. On the other hand, the world is undergoing important transformations in the modes of production and consumption, with a pronounced acceleration in the processes of automation and digitization of economies, “explained as a foreword in the document prepared by the technical teams of the manufacturing plant chaired by Miguel Acevedo.

In the case of the local economy, the industrialists warn that the crisis aggravates the pre-existing problems and stress that the transition towards the “new normal” will be crossed by the economic impact of the pandemic and the economic vulnerability that drags on from the previous phase.

“In addition, coexistence with the virus in the present and immediate future will continue to affect production processes, until the arrival of a vaccine or effective treatment,” they detail while recalling that the country has the third industrial network in Latin America and with a lot of potential to advance their development.

“Having a diversified industry that can supply the market with essential goods, as well as medical equipment and new technological solutions, was strategic during these first months of the pandemic. It will be even more so in the times ahead,” they anticipate. .

Industry drives tax reform

Within this framework, the proposal document has two main pillars: the construction of consensus and institutions for development and the measures to sustain production, generating the conditions for subsequent reactivation and starting a growth process.

Therefore UIA men propose a series of incentives for investment, employment and development in regional economies and companies of all sizess. They are, they say, measures focused on the creation of tax incentives for investment and employment, the expansion of productive financing in banking channels and the capital market, the recovery of industrial exports, the reactivation of demand, development Industry 4.0 and the incorporation of new technologies and the consolidation of an SME policy and the deepening of regional development.

Although all the measures are considered fundamental, the main chapter of the document refers to the need to face a deep tax, fiscal and financial reform that the industrialists demand from the Government to alleviate the crisis.

“In contrast to the economy’s low access to credit, the tax pressure has increased in recent decades and, in level, is close to that registered in European countries,” the report highlights.

They maintain from the UIA that this pressure falls on the formal economy (about 65% of the total) and increases to represent 45% of GDP.

They complain about the multiplicity of taxes at different levels (national, provincial and municipal) and the very low retention and perception regimes that imply a lot of operating burden for companies that is reflected in a greater number of hours dedicated to paying taxes. they reach 311.5 per year.

In global terms, with this amount, Argentina is ranked 156 out of 190 countries ordered from least to most hours, which is why the UIA qualifies as “key” progress in tax simplification and in the creation of new national taxes, provincial or municipal that affect investment and employment.

More fiscal stimuli

In addition to the previous claims, the UIA’s tax proposal includes:

▪ Extension of the moratorium on the Solidarity Law and Facility Plan for MiPyMES, including debts accrued during the emergency.

▪ Similar moratorium regime and payment facilities plan for legal entities not included in Law 27,541, without distinctions, adapting the payment plans so that the MSMEs enjoy a greater benefit.

▪ Extension of VAT maturities and Earnings advances, which allow companies to have working capital, given the lower sales and the extension of payment terms.

▪ Incentives for taxpayers who cancel their tax and social security obligations based on the original schedule.

▪ Reduce 50% or allow the calculation of 100% of the Bank Debt and Credit Tax as payment on account of Earnings, VAT, Personal Assets, from March 20 and up to 60 days after the end of the emergency.

▪ Reestablish partial VAT refund for purchases with a bank debit.

▪ Consolidated current account that allows the free compensation of the balances in favor of the taxpayers against any balance to be paid, whether taxable or social security, including those corresponding to their capacity as substitute managers.

▪ Refund of technical balances in favor, for the purposes of offsetting other taxes.

▪ Promotion of investments in productive activities through fiscal incentives, particularly the adjustment for inflation, repealing the impossibility of applying its effects in those cases in which its application generates a reduction in the taxable income base.

▪ Interest deduction regime on own capital destined for investment.

▪ Reduction of limitations in the use of losses.

▪ Promote activities to provide services in Argentina abroad.

▪ Regulate transparency tax treatment, international corporate reorganizations, deduction of interests between related entities.

▪ Full computation of the tax on banking operations

• Accelerated amortization and early VAT refund for investments in tangible and intangible assets for use related to digitization and Industry 4.0.

• Additional differentiated incentives when these investments involve local productive integration and come from goods of national origin.

“Due to the sharp drop in turnover and the difficulty of accessing credit, companies have increased their debts with tax administrations at all levels. At the same time, they have made significant efforts to sustain employment in a context of unprecedented crisis “the UIA report details.

This combination of factors, adds the work, leaves a very complex panorama for the sustainability of companies, investment and the ability to generate future employment. For this reason, the document calls for progress in a tax scheme that promotes investment, employment and the competitiveness of the economy.

For the UIA, the Government must also regulate that these measures have greater differentiated incentives when they imply the net creation of jobs, with higher differentials for new employment for young people, women, and in areas far from large urban centers.

But aside from the request for tax reform, the document from the industrialists refers to the need to increase financing.

In this chapter, the requests are:

▪ For companies that are operating, with regulated quotas for banks (LCIP simile), to place the excess liquidity of the banks.

▪ 12-month term, 3-month grace period, 24% or less rate with differential for SMEs

▪ Includes companies that are operating, but carry financial stress situations and those that do not operate.

▪ Funded and guaranteed by the BCRA, absorbing the risk to ensure a general scope.

▪ 12 months term, 3 months grace after the activity resumed.

▪ Short-term instruments at interest rates that accompany the costs to preserve working capital.

▪ Develop the market for currency hedging instruments to manage risk.

• Predictability to avoid unwanted precautionary behaviors.

• Electronic credit invoice, e-check, ON PyMES, Short Term Values.

▪ Promotion of demand for SME instruments through institutional investors such as insurers, FGS, FONDEP.

▪ Greater scope of SGR guarantees to increase their accessibility.

• Pre-financing and post-financing of exports: to protect markets.

▪ Long-term lines (5/10 years) for investment financing.

▪ Fixed rate to encourage productive investments.

▪ Do not penalize early pre-cancellation.

▪ Strengthen BICE as a development bank.

▪ Greater capitalization to increase lines of credit for investment.

Bet on Vaca Muerta continues

In addition to tax and financial measures, the UIA document claims to have a hydrocarbon investment law: to exploit the potential of Dead cow and other conventional and unconventional sources, including mining, the development of the chain of supplier companies, the promotion of direct and indirect employment and the increase in exports.

It refers to alternative energies with the renewal of law 26093 on the promotion of biofuels and a regulation of the norm so that it offers greater differentiated incentives when they involve job creation.

They also ask to strengthen the infrastructure of industrial parks as a mechanism to strengthen the competitiveness of companies.

An incentive to establish companies or expand facilities; the continuation of ATP plans until the end of the year for companies with a sharp drop in sales or licensed workers. Inclusion of companies of all sizes.

In the request, they add unemployment insurance to support the transition of workers to new forms of work.

Also that voluntary early retirement is allowed, for people who are close to that age; that the massive bankruptcy of companies in the face of the alteration of the payment chain be avoided to avoid a collapse of the economic system and the legal system.

The report adds the simplified REPRO for companies in crisis procedure; a regulation that promotes teleworking; promoting employment in new technologies; reinforce the knowledge economy law, among other requests.

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