Retrospective: what should the next government do?

Reality speaks and leaves no doubt: the priorities of the government that will take office in Argentina after the next elections are clear. We Argentines do not want and cannot tolerate anything else.

Then I develop some of the key points for the next government.

Absolutely all measures adopted by the next Argentine government should aim to achieve one or more of the following objectives:

1) Reduce the tax effort made by taxpayers: More than 160 national, provincial and municipal taxes that we had until recently. Yes, more than 160. And surely there are already more, because every day we have a new one.

2) Generate legal certainty. In general, legal certainty is the guarantee that the State gives – or should give – to the individual that his person, his property and his rights will not be violated and that, if this were to happen, they would be insured by the state. protection and repair thereof. The problem is that Argentina is increasingly a country with little or no legal certainty.

3) Recognize a greater degree of freedom for citizens: restrictions on buying dollars, restrictions on travel, restrictions on hiring employees and more restrictions, more restrictions. The freedom of the people cannot continue to be the price to pay for many of the wrong decisions leaders make every day.

The reality is that if a decision to be made does not generate at least one of the effects stated above, it makes no sense to make it.

Of the governments that Argentina has had over the last 70 or 80 years, and perhaps more, only one has carried out a program in line with what we are proposing in this column. And although they didn’t do it consistently, Argentina grew.

Of course, I am referring to the controversial presidency of Carlos Saul Menem who, among other things, deregulated the economy, privatized hugely loss-making state enterprises, and had a tax policy that, although it included several errors, would have even sometimes made Laffer himself happy.

Unfortunately, at the same time, he made the country heavily indebted (under his mandate, the external debt increased by 123%), he confiscated private sector savings (I am of course referring to the Bonex plan devised by Erman a González), he was the father of modern corruption and did nothing to contribute to the legal security of the country (beyond corruption, he increased the number of members of the Supreme Court in order to reach the famous “majority automatic” and issued 545 decrees of necessity and urgency). I leave aside the issue of Río Tercero and the attacks on the Israeli Embassy and AMIA because they do not address the issues we are dealing with here.

Returning to his fiscal policy, he alternated excellent measures with very bad measures, the consequences of which we continue to pay today.

I’ll summarize it so as not to expand too much. Perhaps he will one day deserve to write a column exclusively devoted to the fiscal policy promoted by the Menem-Cavallo couple.

For the purposes of this column, let’s say that to the credit of his fiscal management are the significant drop in income tax (which had reached a record high under the Alfonsín government) and employer contributions, the abolition of the vast majority withholding taxes, the repeal of check tax, and even the decision to raise VAT instead of raising another tax, such as personal property or even the aforementioned income tax.

Among the bad ones, the decision to maintain the wealth tax, which in 1991 became the personal property tax, the adoption of the global income system (replacing the territorial income system which was in force in time) and, the worst of all his initiatives: the constitutional entrenchment of the disastrous federal law on co-participation.

There is no way for Argentina to get out of the situation where it is without tax competition between its provinces. Whoever occupies the Casa Rosada from December 2023 must succeed in doing so. Argentina’s golden years all predated that fool’s sanction in 1935.

I will end with this reflection: the only government that came close to what we were proposing, even if it made a lot of mistakes, succeeded in increasing per capita GDP, in ten years, by 34% (from $8,149 in 1989 to $10,935 in 1999 Imagine what would happen if the next government, in addition to deregulating the economy (i.e. granting more freedoms to citizens) and reducing the tax effort of taxpayers (which is, today, among the highest in the world), was not corrupt and concerned with creating legal certainty.

The situation is clear and the stage is critical. In other words, “the ball is short”.

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