The debate about Tax and labor reform projects – “Second Generation” – intensified after the government’s landslide victory in the elections Legislative elections On Sunday, October 26th.
In recent weeks Some reports and suggestions from specialists, unions and different social groups appeared, and there was room for the perverted game of fake news..
In this context, a rumor arose about a new proposal proposed by the administration President Javier Miley: Eliminate monotax.
How real is this initiative? For the time being, the head of state has ruled out the possibility of repression Simplified system for small taxpayers. In an interview with the TV channel, he expressed “lies and criminal operations.” Neora flow.
He explained: “The teams are working, and this is consistent with tax reform and modernizing the labor market. But ease your anxiety a little; Projects will be when they should be“.
However, the option to modify the monotributistas schema is necessary. This is what he referred to International Monetary Fund In it Staff report It was published on April 11, the date on which the Extended Facility Agreement with Argentina was closed.
Within the department “The tax system in Argentina and reform considerations”The organization stressed that the country must implement “Fundamental restructuring of its tax system to strengthen the financial pillar“.
In addition, the document identified the main points for implementing a “collection-neutral tax reform.” Among these guidelines there is a small request regarding unilateral taxation.
“Gradually reduce distortive taxes on exports and financial transactions, and replace them with simpler and better-managed direct taxes on households and businesses. This requires Harmonizing the single tax rate and improving the transition of small taxpayers into the general tax system“Says page 40, contained in the road map presented to the government.
For now, this proposal has sparked (a lot of) controversy and debate in recent days. The Chief of Staff said: “Until it comes out through official channels, everything that is circulated is false.” Manuel Adorni.
Monotax: what are the risks of eliminating the simplified system
The unilateral tax was created in 1998 with the aim of promoting a simplified system that facilitates compliance, and as tax expert Sebastian Dominguez explains: Facilitating the idea of creating a starting path and then moving to the general system.
Specifically, the unilateral tax allows small taxpayers, through a fixed amount, Payment of retirement contribution, social work, and income tax And value added tax.
“In practice, Those who are in the unitary system have no interest in moving to the general system He often seeks to remain in the same situation even when he does not agree with it SDC Tax Consultants.
In this regard, he listed some of the problems that the system suffers from:
- Low retirement contributionAccording to Dominguez, at least 25 single-income earners – Class A – are needed to pay the minimum to retire.
- Low social work contributionIn this regard, single distribution holders – Classes A, B and C – pay $19,239.97 per month and are covered. Although it is difficult to “be able to cover the costs of social work.”
- Evasion due to “financial stunting”: The specialist confirms that some monotributistas, to stay in the category or even in the system, reduce the bill or divide the bills between family members, among other modalities.
So, what happens if the monolith is eliminated? Dominguez warns that if the simplified system is abolished, without making changes to the overall system, taxpayers:
- They must pay Self-Employed Superannuation $82,000.
- They will have to pay for prepaid medications If they want to get medical coverage.
- It may be so They cannot pass on VAT to their customers and must absorb it in whole or in part.
- They may have to Pay income tax.
- They will have to Submitting sworn VAT and profit tax returnswhich means greater official and administrative demands.
- If the uniformity of provinces and municipalities is adhered to, It will have obligations towards gross income and municipal taxes separately.
According to this, the Argentine Social Development Institute (Idesa) He explained: “Its lower complexity (complexity of the monolithic system) and costs compared to the general system makes it quite acceptable and that Its modifiability raises concern among freelancers who use it“.
However, the think tank highlighted reasons why it would be advisable to modify the simplified system.
“It highlights asymmetry in relation to other workers. For example, The employee must pay 11% of his income to retirement, 3% to social work, and 3% to PAMIThat is 17% in total More income tax if you have a high income. A self-employed person must pay a fixed amount depending on the category –Which amounts to $258,000-L Retirement, between 5% and 35% depending on income level for income taxesextra 21% VAT and He does not have health coverage. On the other hand, the monotributista Pay only 5% to 8% of your income for all their retirement and tax obligations and enjoy social work coverage.”
For her part, Ecofuse Consulting Company They point that out Monotributistas represent 16% of registered workersbut They pay only 2% in employment taxes. “Wage workers, in the public and private sectors, represent 73% of formal employment and end up paying 96% of employment taxes,” the chart shows.
The axis in question, depending on which company is driving Economist Miguel Kegelhe Inequality in the tax burden. “On average, Monotributistas contribute 4.5% of their work income, Compared to 28% for self-employed workers (VAT deduction is not included). The solution is not to overthrow the regime, but to change contributions.”
Changes in the unitary tax system: how much can the simplified system be modified, according to tax experts
As reported by EDISA, based on data from the Ministry of Labor and the National Institute of Statistics and Censuses (INDEC), It is estimated that there are 6 million people who are self-employed Among them:
- 6% of those registered are self-employed.
- 34% of those registered are single shareholders.
- The remaining 60% are unregistered or unofficial.
Dominguez stressed that “amending or even abolishing the unilateral tax has grounds from a technical point of view but must be accompanied by other reforms of the public system so as not to be a leap into the void with a significant increase in the tax burden and medical coverage.”
He highlighted: “If unilateralism is abolished without a comprehensive reform of the public system, the impact will be negative.” We will have more informal work, fewer taxpayers meeting their obligations, and many more people outside the retirement system and without medical coverage.“.
For a partner SDC Tax Consultants, Changes in the overall system are necessary It cannot be postponed if we intend to move in this direction. “Doing everything together, too suddenly, can be counterproductive,” he warned.
Related to this, Edessa realizes that the change to a single tax system “must be carefully designed,” otherwise “the reform may generate the opposite effect.”
Under this scenario, they also consider that “The complexity and high cost of the freelancer system makes it impossible for the vast majority of freelancers to join.“.
What solution do you suggest? Create an income tax that absorbs personal contributions to Social Security for employees, and personal contribution and income tax for the self-employed and unilateral contributors..
“That is, all workers – whether wage-earners or self-employed – are subject to the same tax. The design of a personal income tax must take into account non-taxable minimums and progressive rates that grow with a person’s income level. To maintain simplicity, The settlement of the tax in the case of self-employed workers shall be the responsibility of ARCA (Customs Collection and Control Authority). Based on the electronic invoices issued by each taxpayer.
The research center also confirmed this The income tax pressure will be the same for employees and the self-employed. They added: “With regard to value-added tax, a minimum amount must be stipulated when the commitment is voluntary (for small merchants and service providers), and starting from the mentioned amount, the commitment is mandatory with automatic settlement also by ARCA, based on electronic invoices.”
Monotax: What are the current amounts by each category
- Class A: $37,085.74 per month for providing services and selling personal items.
- Class B: $42,216.41 per month for providing services and selling personal items.
- Category C: $49,435.58 for providing services and $48,320.22 for selling personal items.
- Category D: $63,357.80 for providing services and $61,824.18 for selling personal items.
- Category E: $89,714.31 for providing services and $81,070.26 for selling personal items.
- Category F: $112,906.59 for providing services and $97,291.54 for selling personal items.
- Category G: $172,457.38 for providing services and $118,920.05 for selling personal items.
- Category H: $391,400.62 for providing services and $238,038.48 for selling personal items.
- First category: $721,650.46 for providing services and $355,672.64 for selling personal items.
- Category J: $874,069.29 for providing services and $434,895.92 for selling personal items.
- Class K: $1,208,890.60 for the provision of services and $525,732.01 for the sale of personal property.