The Argentine government announced on Monday (18) measures to preserve the purchasing power of the most vulnerable sectors of the population and combat the negative effects of the war in Ukraine on the country’s economy. In an act at the Executive’s headquarters, Argentine President Alberto Fernández and Economy Minister Martín Guzmán said that “extraordinary bonuses” will be granted to informal and self-employed workers and low-income retirees.
One of the strategies to bear the costs of the measures will be the creation of a mechanism to capture the “unexpected” revenues obtained by certain companies, which profited from the effects of the conflict in Eastern Europe.
“We need those who have unexpectedly won to collaborate with their tax contribution to help those left behind,” Fernández said.
Argentina, which for years has registered high levels of inflation, is going through a period of acceleration in price increases, with accumulated inflation in the first quarter of the year of 16.1%. In March alone, the index was 6.7%, in relation to February, and reached 55.1% in interannual terms.
Last year, inflation in Argentina was 50.9%, while wages grew by an average of 53.4%. The income of the most vulnerable sectors, however, grew below the rate of expansion of consumer prices. According to official data, almost a third of employees in Argentina are self-employed and three out of ten salaried workers work informally.
Guzmán argued that the war in Ukraine “is generating very strong pressures on the prices of food, energy and metals around the world” and a “crisis in the distribution of income”.
The minister explained that the government is considering creating a tax rate on the “unexpected” component of the revenue of a group of companies with annual net profits of more than 1 billion pesos (about R$40 million). In 2021, only 3.2% of companies in Argentina had a net profit above this amount.
Guzmán also indicated that there will be other criteria for applying the tax, including that net income has increased significantly this year and that the profit margin has been “abnormally high” in 2022. In addition, the contribution payable will be lower if the company allocate the extraordinary income obtained to productive investment.
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