The tax cuts that the government has included in the labor reform law will cost the state treasury in the amount of 0.8% of GDPa private screening permitted at Casa Rosada. In comparison, it is equivalent to half of the budget surplus that the Ministry of Economic Affairs must show in 2026according to the budget.
The final articles of reform submitted to Congress provide for a series of tax cuts that will reduce some of the revenue if the project is approved.
These include a significant reduction in the contributions that companies pay on their employees’ salaries – to the pension system and social security -, a reduction in corporate tax and the abolition of some internal consumption taxes such as insurance services, mobile and satellite telephony, and the purchase of luxury cars, boats or planes.
According to estimates by consultancy Invecq, the fiscal cost to the national government would be 0.83% of GDP. The majority (0.5%) would be explained by the Reduction in employer contributions and the rest reacts to the decrease Profits for companies (0.2% of the product) and the cancellation of internal taxes (0.1% of GDP).
This impact for the Treasury is not small: by comparison, it represents just over half of the primary surplus that the government will need to accumulate over the course of 2026 to cover interest on the debt and end the year with a budget surplus for the third year in a row. The 2026 budget assumes that the primary surplus is 1.5% of gross product.
From the government after presenting the labor reform project: They avoided talking about fiscal implications because the balance of public finances is seen by the market as the backbone of the economic plan and they are trying to exclude any pressure on this front. In any case, official sources assured Clarín that this was 0.8% of GDP agrees with the calculations That’s what they did in the Treasury.
By definition, such an impact on fiscal development could mean a slightly more difficult path to maintaining surplus. For the time being, the government has refrained from presenting a concrete draft law to solve the tax issue. “The tax changes (beyond the necessary reduction in labor costs through lower employer contributions) are also welcome because they help to simplify an overly complex tax system,” Invecq said.
In any case, he assured that “they do not address the core of the distortions” with taxes such as gross income – the power of governors – check taxes or withholdings on exports, beyond the latest announcement last week. This partial rate cut will also have its own fiscal cost: 0.1% of GDP.
“These taxes slow down production and investment, but – as expected by the Minister of Economy – would not be part of a reform in the short term due to the small fiscal space to reduce taxes, which represent almost 8% of GDP,” Invecq concluded.
In government They say they are less concerned about the expected fiscal cost of lower taxes. First, they assure that stronger economic activity in 2026 should initially lead to this “additional” collection. In addition, they would provide compensation in social security if jobs were to be formalized. According to a report from the Congressional Budget Office (CPO), next year tax revenues will amount to 0.47% of GDP due to the tightening of fuel and personal income taxes.
Other official sources responded to the query Clarion that adaptation “creates one Month to month budget savings “The project does not jeopardize the budget surplus and has no impact on retirement or the pension system,” they concluded from Casa Rosada.
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