Argentina Turns To VAT To Fund Income Tax Cuts

Argentina reportedly is considering shifting the tax burden on VAT, to bring the country’s corporate tax rate down to a competitive level.Specific measures are expected to be tabled before lawmakers soon. It is anticipated that there could be a 10% cut to the corporate income tax rate, to bring it down to 25%, which would be closer to regional competitors.

 

To fund the changes, Argentina is expected to comprehensively reform value-added tax, in particular by removing several tax breaks and exemptions.

 

The changes would be in line with recommendations from the OECD in its June report for the country. The OECD said that Argentina should introduce wide-ranging tax reforms, including reducing its corporate tax and broadening the value-added tax (VAT) base. It noted that the tax burden has increased by over 7% of GDP over the past decade and the country now has a relatively high corporate income tax rate. In addition, “a complex and inefficient tax system is hampering productivity, investment, and the competitiveness of firms,” it said.

 

The OECD recommended that Argentina should shift the tax burden away from corporation tax towards indirect taxes such as VAT, and environmental and property taxes. It also recommended that Argentina broaden its base for personal income taxes, as they are paid by just 10% of the population.

 

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