Government advances bill exempting 1.3 million from income tax

Argentina’s lawmakers have taken a major step in exempting about 1.3 million citizens from paying income taxes.

After a marathon debate, lawmakers in the lower house Chamber of Deputies passed a bill on Sunday to double the minimal taxable income to 150,000 pesos a month (US$1,633) from the current level of about 75,000 pesos for a single person and 99,000 for a married worker with two children.

The reform, pushed by Lower House Speaker Sergio Massa ahead of mid-term elections in October, passed unopposed after a rare Saturday legislative session, with 241 votes in favour and three abstentions, all from opposition lawmakers. The measure, which would reportedly exempt more than one million workers from ganacias, now goes to the Senate.

Massa and other Peronist leaders have sold the bill as a way to boost Argentina’s economic recovery from the pandemic. They argue it’ll incentivise consumer spending, which will translate into more revenue from sales taxes. Those who are newly exempt but who have paid income tax since January 1 would be reimbursed under the bill.

"This is a fundamental step so that 1,267,000 workers and retirees stop paying" income tax, said Massa.

"It is a measure of fiscal relief focused on the middle class. There are 44,900 million pesos (US$458 million) that are going to return to the economy. Everything goes to consumption, to commerce," he added.

If approved, the reform would see the tax base for ganancias pass from 22 percent to 7 percent of the country's 20 million workers.

To help plug the gap of lost income tax revenue, Argentina is targeting rich citizens. The nation’s wealthy have until April 16 to pay a one-time “extraordinary contribution” derided by business chambers as anti-competitive. A judge recently ruled in favour of one citizen seeking to avoid the tax.

Argentina's government set a primary fiscal deficit target of 4.5 percent of gross domestic product for this year. It expects to finance most of the spending gap by printing money.

According to the INDEC national statistics bureau, a typical family (married partners, two childen) needs an income of more than 38,000 pesos to not be considered poor. Poverty currently afflicts around 40.9 percent of the population.