The tax challenge of Cordoba: the Mediterranean Foundation estimates that it will take 16 years to eliminate Gross Income

Argentina's province of Córdoba faces a formidable challenge in eliminating its Ingresos Brutos tax, according to an analysis by Osvaldo Giordano, president of IERAL-Fundación Mediterránea. The economist estimates it would take approximately 16 years for the province to generate enough revenue through economic growth alone to replace these taxes while maintaining current public spending levels. This projection highlights the complexity of Argentina’s fiscal landscape and underscores the difficulty of achieving meaningful tax reforms without structural changes. The analysis assumes a sustained annual economic growth rate of 3.3%, which Giordano describes as optimistic given Argentina's historical struggles to maintain such rates over extended periods. Under this scenario, Córdoba would require nearly two decades to accumulate sufficient resources to eliminate both Ingresos Brutos and the Stamp Tax without compromising fiscal balance. Other provinces, including Santa Fe and Mendoza, would need around 14 years, while Buenos Aires could take almost 20 years under similar conditions. Giordano argues that waiting for economic growth to generate additional revenues before reducing taxes is not a viable strategy. He points out that future reductions in public expenditure are likely to be minimal at best, making it unrealistic to rely solely on economic expansion to fund tax cuts. Instead, he advocates for a comprehensive overhaul of Argentina’s tax system, emphasizing the need to remove distortive taxes that hinder competitiveness, such as retention taxes, check taxes, Ingresos Brutos, Stamp Taxes, and numerous municipal fees. His proposal centers on replacing existing taxes with a more efficient structure, specifically suggesting a “Super VAT” model that would consolidate the current overlapping system of Value Added Tax (IVA), Ingresos Brutos, and municipal levies. According to Giordano, this approach could help maintain revenue collection, reduce tax evasion, and eliminate inefficiencies currently affecting business competitiveness. He also suggests accelerating the elimination of retention taxes by strengthening the collection of other taxes, such as Income Tax and Personal Property Tax. The analysis draws attention to the broader context of Argentina’s fiscal challenges, noting that the country has long struggled with balancing economic growth and tax reform. Giordano references the Fiscal Consensus of 2017, which demonstrated the risks of relying exclusively on economic growth to offset lost tax revenues. He warns against adopting a purely gradualist approach and instead calls for combining fiscal austerity with deep tax reforms aimed at simplifying the system and improving national competitiveness. The findings place Córdoba among the provinces facing the longest path to tax elimination, highlighting the disparity in regional fiscal capacities. While some provinces might achieve their goals faster due to different economic structures or revenue streams, Córdoba’s reliance on Ingresos Brutos and Stamp Taxes presents a unique set of obstacles. The province’s situation reflects the broader difficulties faced by Argentina in implementing effective tax policies that support both economic stability and long-term growth. Giordano emphasizes that maintaining fiscal discipline remains crucial, but he cautions that it will not be sufficient to resolve Argentina’s tax issues on its own. His recommendations focus on creating a more sustainable and equitable tax framework that aligns with international standards and supports economic development. By addressing the root causes of fiscal imbalance, Argentina could move toward a more resilient and competitive economy.