The government of Argentina announced this Monday the submission to Parliament of a bill to create a mechanism through which the Treasury will capture part of the “unexpected income” obtained by large companies as a result of sharp increases in international prices since the beginning of the war in Ukraine.
“This war submits us to two realities: that millions of human beings are at risk and that very few gain much from the effects of this war. It is an immorality that we cannot allow,” said Argentine President Alberto Fernández, presenting the bill. in an act with the Minister of Economy, Martín Guzmán.
The minister said that the government wants companies to win, but with “shared growth” that affects the whole of society and highlighted that other countries, such as Italy and the United Kingdom, have already devised similar mechanisms to “manage the unexpected returns of the war”.
The initiative presented today proposes the creation of a “surcharge” of 15% on the “unexpected” component of earnings, defined as net income that in real terms is higher than in 2021.
The rate, which will be added to what companies pay annually in income tax, will apply to companies with annual net profits that in 2022 exceed 1 billion pesos (about US$7.9 million).
In addition, to be covered by the “surcharge”, companies must meet one of two conditions: that the profit margin (accounting profit on their revenue) in 2022 is greater than 10%, or that the increase in the profit margin in 2022 compared to 2021 is at least 20%.
Guzmán argued that the war in Ukraine, which began in late February, had unleashed strong pressures on raw material prices around the world. This “shock” would have given certain sectors of the economy the possibility of having an extraordinary income.
The poverty rate in Argentina stood at 37.3% of the urban population in the second half of 2021, while the indigence rate stood at 8.2%, but these rates are expected to be higher in the first half of 2022 due to the increase of the value of the basic basket.
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