The Argentine Government of President Alberto Fernández Monday announced it planned a new tax which was called the windfall income, to be levied on companies that last year had profits over AR$ 1 billion (around US$ 5 million at the unofficial exchange rate).
The idea is to ask those who have had an extraordinary profit to contribute amid this plight, Fernández said while launching the initiative alongside Economy Minister Martín Guzmán.
Those who have gained unexpectedly as a consequence of war should collaborate with their contribution to help those who have been left behind. See how we help them to genuinely promote work. Reaching the latter is my greatest obsession. First the last ones, said the President, who also explained the project is to be discussed in Congress in the next few weeks.
According to Guzmán, only 3.2% of the companies operating in the country would be reached by that new tax. He added that today we are experiencing a crisis of income distribution for which the government seeks ”to build a mechanism to ensure that this shock (derived from the war in Ukraine) does not have an unequal and regressive impact on our society.
The Minister said that in the coming weeks the government will convene the productive, labor and political forces to discuss the construction of a mechanism to capture part of the unexpected income that is not the result of additional investments, but of the shock of the war in Ukraine.
In this context, he explained that the war conflict caused certain sectors to have an extraordinary income and affirmed: We are seeking to capture part of that income so that the State can carry out an equitable development, attack child poverty, and achieve greater social inclusion.
There will be other criteria to be reached by the new tax, Guzmán explained. Real profit must have increased significantly and the ordinary result in relation to sales (profit margin) must be abnormally high in 2022,″ he underlined. But if the windfall income is channeled towards productive reinvestment the amount of contribution will be lower, he added.
Opposition lawmakers from Juntos por el Cambio (JxC - Together for Change) have already warned they would reject the initiative.
NO MORE TAXES. The tax burden must be lowered and the tax structure, which is anti-employment and anti-export, must be changed. The government cannot come up with an idea other than creating more and lousy taxes, tweeted Congressman Luciano Laspina.
Deputy Waldo Wolf agreed: If I did well and earned 20% more, but my brother, my mother, two friends and my son did badly and went bankrupt, the unexpected income is netted with the help I provide to them? Stop meddling in people's private lives by changing the rules in the middle of the game.
Meanwhile, Congressman Ricardo López Murphy wrote: Control emission, lower taxes and tackle structural reforms? Of course not.
Exporters and farmers also rejected the announcements: Technical definitions on who will contribute are lacking, but exporting companies will be included due to their turnover volume, Gustavo Idígoras, of the Chamber of the Oil Industry and Grain Exporters Center (Ciara-CEC), told BAE Negocios.
With this new tax, the Government also said it planned to grant a bonus to pensioners and self-employed workers to help them cope with rampànt inflation.