The measure that the Government could take to compensate for the fall of the PAIS tax

The recent elimination of the Tax for an Inclusive and Solidarity Argentina (PAIS) has generated a great debate about how the Government Argentina plans to compensate for the drop in tax revenue that this tax represented.

The PAIS Tax, which was in force for five years, contributed more than USD 17.3 billion, which is equivalent to 3% of the country’s Gross Domestic Product (GDP). Its elimination poses a significant challenge to public finances, and the Government has outlined several strategies to mitigate the impact of this loss of income.

The PAIS Tax was implemented in December 2019 as part of a package of economic measures aimed at stabilizing the Argentine economy. This tax applied a 30% surcharge on operations in dollars, including purchases with credit and debit cards abroad, and on the acquisition of foreign currency for savings.

The decision to eliminate the PAIS Tax is framed in a context of broader economic reforms, which include changes in the tax structure and greater openness to international trade. The Government hopes that the elimination of this tax will help reduce the cost of imports and keep inflation around 2% monthly or even below.

The measure that the Government could take to compensate for the fall of the PAIS tax

To compensate for the drop in income due to the disappearance of the PAIS Tax, the Government has outlined several strategies that include the increase in other taxes and economic reactivation. Below are some of the main measures:

The Government projects an increase in the effective tax pressure of the Income Tax, which is expected to contribute 0.63 percentage points of GDP. This increase is due to the reinstatement of the Income tax, which came into effect in the second half of 2024.

The measure that the Government could take to compensate for the fall of the PAIS tax

Possible measures

An increase in employer and social security contributions is expected, which would contribute 0.5 percentage points of GDP. This increase is linked to greater economic activity and the creation of formal employment.

He Government It also projects an increase in export duties, which would contribute 0.47 percentage points of GDP. This measure seeks to take advantage of the growth in exports and the improvement in the terms of trade. An increase in fuel tax collection is expected, which would contribute 0.34 percentage points of GDP. This increase is aligned with the update of the tax and the growth in fuel consumption.