Agreement with the IMF: the government negotiates with Washington a plan to reduce tax evasion

Agreement with the IMF: the government negotiates with Washington a plan to reduce tax evasion

(Photo: AFIP)

The government and the IMF are working, alongside the revision and change of expected objectives, on a plan to raise the compliance level on two key taxes such as VAT and income. In the weeks to come, there will even be a technical mission to take a first decisive step forward: today the AFIP does not have a precise estimate of how much the percentage of escape profits, both in companies and in individuals.

This is a parallel objective to the quarterly and annual objectives which form the backbone of the agreement –reserves, budget deficit and monetary problem– but which also has concrete metrics. Through a strategic plan for 2026 shared with IMF staff, AFIP aims to reduction of tax evasion for the next years.

In the case of VAT, where there is clearer information on the non-compliance gap, the “tax avoidance objective” should be 34.3%a goal which, according to the tax administration, was reached in 2022. For this year, this metric should fall to 31.5%they specified.

In Earnings, the problem is twofold, not only due to the escape itself but also due to the lack of consolidated information, which is the first step they seek to take between Buenos Aires and Washington. As explained in the tax office, Argentina has no a precise measurement discrepancy, which is why he was unable to set specific targets with the Fund for this tax. AFIP’s initial calculations indicate that profit evasion would be higher even that of the VAT.

The IMF technically advises the AFIP to measure profit evasion.  Reuters
The IMF technically advises the AFIP to measure profit evasion. Reuters

For this reason, both parties have entered into technical negotiations to establish a standard – which will be overseen and validated by international bodies – for this hole in Profits compliance. The government has provided, on a preliminary basis, information on the payment in companies, who represent the 80% of collection of the tax, and then it will continue with small businesses and with individuals.

This strategic plan shared with the Monetary Fund will include “voluntary compliance enhancement” measures, with “detection and deterrence” of non-compliance, and specifically target economic activities they deem relevant, such as cereals, construction -AFIP specifically targets cement production, to which it attributes high levels of informality-, mining mining and fishing.

In the case of the VAT, they recognize that it has “a fluctuating behavior” and consider that there is a low level transversal payments to all economic sectors. To reduce this compliance gap, the program with the Monetary Fund has appeared on the scene. “It was agreed a technical advice on the risk management system,” official sources said.

“Dialogue between the Ministry of the Economy and the Fund is ongoing on this issue. Have Specific objectives in terms of tax administration and VAT non-compliance. In 2022, we have made a commitment to reduce to 34.3% the default gap and we are back to pre-pandemic levels and we believe we are in compliance,” said an official involved in negotiations with the IMF. “By 2023, the goal is to 31.5%which would involve a minimum value history,” he said.

There is an explanation as to why there are metrics to measure VAT fraud but not yet in profits. “VAT is a loophole that AFIP has followed historically. We noticed the same was not done with the profits and when we discussed it technically we saw that there was a methodological difficultyIt is very complex to do. We set to work on this, we offered the Fund a commitment to make a gap measurement profits, which few countries in the world do”, explained the organization led by Carlos Castagneto

“In a few months, we will have first number Default revenue spread. Brazil is also working in this direction and countries like the United States, United Kingdom, Canada, Australia and Denmark already have it. We are going to have an advisory mission next month on this issue,” they remarked from an official office.

The AFIP aims to reduce tax evasion committed with the IMF
The AFIP aims to reduce tax evasion committed with the IMF

On the other hand, they estimated beforehand that “if there is an overrun of more than 30% in the case of VAT, profit should be higher. The breakout is very high, we are in the red. We want to end this year leaving an internationally validated methodology,” they concluded.

The negotiation on the fraud reduction plan is taking place in parallel with the round trip that the Ministry of the Economy is still carrying out with the Monetary Fund to clarify the announcement of the recalibration of taxation accumulation of reservessomething that is expected for the next few hours, when it had been announced for the beginning of the week.

The contact is made by the Deputy Minister of Economy Gabriel Rubinstein and the head of the ministry advisers Leonardo Madcur. The initial quarterly objective stipulated that the leading agency Miguel Pesce should have by about March 31, about $7.8 billion.

This is composed of $2,277 million with which the BCRA already had in December 2021 -according to IMF calculation- plus the $5.5 billion which were planned for this first quarter. Everything indicates that these figures will now be much lower.

Continue reading:

Tax collection has risen below inflation for the second consecutive time in the past 27 months
Industrialists resume demand for tax pressure and seek political support ahead of elections
Blackout: How supply was restored and why the government thinks it could be sabotage
Power cuts: the Government ensures that the electrical system is already operational and in normal operation

Melissa Galbraith
Melissa Galbraith is the World News reporter for Globe Live Media. She covers all the major events happening around the World. From Europe to Americas, from Asia to Antarctica, Melissa covers it all. Never miss another Major World Event by bookmarking her author page right here.For tips or news submission: