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Argentina announces tax on “unexpected” corporate income

O presidente da Argentina, Alberto Fernández

The President of Argentina, Alberto Fernández | Photo: EFE/ Juan Ignacio Roncoroni

20220419150724 20220419150724The government of Argentina announced this Monday (19120742 ) measures to “preserve the purchasing power of the most vulnerable sectors of the population” and “fight the negative effects of the war in Ukraine on the country’s economy”. In an act at the Executive’s headquarters, Argentine President Alberto Fernández and Economy Minister Martín Guzmán said that “extraordinary bonuses” will be granted to informal and self-employed workers and low-income retirees.

​​​One of the strategies to bear the costs of the measures will be the creation of a mechanism to capture revenue “unexpected” obtained by certain companies, which profited from the effects of the conflict in Eastern Europe.

“We need those who have unexpectedly won to collaborate with their tax contribution to help those who were left behind,” Fernández said.

Argentina, which for years has registered high levels of inflation, is going through a period of acceleration in price increases, with inflation accumulated in the first quarter of the year 16,1%. In March alone, the index was 6.7%, compared to February, and reached 55,1% year-on-year.

Last year, the inflation in Argentina was 50, 9%, while wages grew on average 16,4%. The income of the most vulnerable sectors, however, grew below the rate of expansion of consumer prices. According to official data, almost a third of employees in Argentina are self-employed and three out of ten employees work informally.

Guzmán argued that the war in Ukraine “is generating very strong pressures on the prices of food, energy and metals around the world” and a “crisis in income distribution”.

The minister explained that the government is considering creating a tax rate on the “unexpected” component of revenue of a group of companies with annual net profits of more than 1 billion pesos (about R$ 16 millions). In 2022, only 3.2% of companies in Argentina had net income above this amount.

Guzmán also indicated that there will be other criteria for applying the tax, including that net income has significantly increased this year and the profit margin was “abnormally high” in 2022. In addition, the contribution payable will be lower if the company allocates the extraordinary income obtained to productive investment.

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