In Argentina, a heated discussion over the reduction of the Income Tax has become the main point of dispute between the Government and provincial governors. The provinces do not want to suffer a reduction in their revenues in 2027, the election year where the great majority will seek to renew their mandates or aspire to the presidency. The Government proposed a reduction in the profit tax rate that companies must pay from 2026, from 35% to 31.5%; a reduction in employer contributions; established an advance VAT scheme for the new small business investment regime (RIMI) and reduced internal tax rates. The governors maintain that this tax chapter will have an impact this year of more than 3 trillion for the provinces, but the Minister of Economy, Luis Caputo, clarified that the fiscal impact will not be felt until 2027 and will be almost 1.5 trillion pesos. The standoff The Government does not want to give in on this point and seeks to negotiate with the governors, who have so far remained inflexible because they do not want revenue to be reduced in an election year, according to the Argentine News Agency. The project establishes a reduction in the Income Tax rates for companies for fiscal years starting in 2026 from 35% to 31.5%, which will not have an impact until 2027, the year in which the authorities of the Executive Branch and the provinces are elected. Another point that also allows for a revenue reduction is the creation of the Medium Investment Incentive Regime (RIMI), which grants benefits such as the advance return of VAT and accelerated amortization in Income Tax for productive projects of up to millions of dollars, with a fiscal impact of 0.2% of GDP. It also authorizes the updating of tax losses for inflation, which alleviates the tax burden for the future if an increase in inflation is considered. With a lower fiscal impact, the elimination of Internal Taxes for insurance, cellular and satellite telephone services, luxury items, motor vehicles and engines, recreational or sports boats, and aircraft, and a 10% reduction on cinema tickets to finance INCAA is also contemplated. The initiative promoted by the Government provides for a reform of employer contributions from 18% to 15% in industries and SMEs, as a way to encourage the creation of registered jobs.
