If tax is reinstated, Buenos Aires, CABA, and Mendoza will be the least preferred provinces

The Government is pushing for the approval of the restitution of Income Tax for high-paid salaried workers as part of the tax reform in Congress this week. Chief of Staff Guillermo Francos stated that they are focusing on Profits and Personal Assets, as they believe these changes will benefit the provincial accounts due to their co-participatory nature and their impact on issues like money laundering.

According to an IARAF report, the change in Profits would result in a greater effective tax burden for the economy, estimated to be 0.5% of annual GDP. This amounts to approximately $3,100,000 million today. The distribution of the tax revenue collected is divided, with 60% going to the provinces and CABA, and the remaining 40% going to the Nation.

Not all provinces will receive the same amount, as the report indicates. Those at the extremes, such as Tierra del Fuego, Catamarca, and Formosa, would benefit the most from the distribution of proceeds, receiving additional annual amounts of $115,000, $110,000, and $103,000, respectively. Meanwhile, provinces like CABA, Buenos Aires, and Mendoza would receive lower amounts of $13,600, $21,600, and $35,000, respectively.

On average, provinces would see an additional transfer of $67,500. Provinces like Santiago del Estero and San Juan would receive extra income from co-participation of $67,000 and $71,000, respectively. It is essential for governors to analyze the comprehensive impact of the tax reform, considering factors like Profits, Personal Assets, moratorium, and the externalization of assets to determine its favorability for their province.

In the case of provinces like Catamarca and Formosa, the Profit reform would be advantageous. For example, Catamarca would receive an annual amount of $110,000 per inhabitant, resulting from an extra income of $47.5 billion and a population of 429,500 inhabitants. This additional income outweighs the higher income tax that Catamarcans will have to pay under the reform.