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Omnibus law: negotiation with the opposition could make the Government lose part of the fiscal adjustment plan - Infobae
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www.infobae.com
January 22, 2024
Retirements and withholdings explain almost 1% of GDP in the “excel” to end the deficit proposed by the economic team. What changes are being discussed by Congress?
By Mariano Boettner
The ruling party and the opposition define how the omnibus law will be before its treatment in the Chamber of Deputies (Maximiliano Luna)
The give and take that the ruling party and the opposition rush in the Chamber of Deputies to shape the treatment that the omnibus law will have this week could reconfigure the fiscal roadmap that the Minister of Economy Luis Caputo planned for these first months of Javier Milei's government.
The different chapters of the mega project that have a fiscal impact could experience, as a result of the negotiation still underway, a reformatting that forces them to “do the numbers” again and distribute otherwise the weight of the adjustment in other areas of public spending.
There are two elements that appear to be the most discussed in fiscal terms between La Libertad Avanza and the opposition blocs that seek to accompany at least part of the omnibus law so that the Executive Branch has room for economic maneuver in its first year of mandate. This is the chapter on export duties, in which the Government determined a general increase in withholdings that aroused rejection in different sectors and, on the other, a sensitive spending item such as pensions.
Caputo's “Excel” indicates, if there were no changes such as those discussed in the Congressional offices, that a relevant part of the financial balance aimed at this year is based on these two factors and represents close to one percentage point of GDP, about 1.7 trillion (millions of millions) pesos. Modifications in these two aspects would make the government need to deepen budget pruning in other areas of spending, a scenario that has already been exposed Infobae. Subsidies would appear there (whose unpleasant counterpart would be a more rapid increase in electricity, gas and transportation rates), public works and transfers to provinces such as compensation.
However, according to the roadmap proposed by the economic team, retirements and pensions have a weight of 0.4% between the 5.2 points of the Product that make up the total fiscal adjustment. The omnibus law provides for the suspension of the current automatic updating formula to make way for discretionary increases by the Executive Branch until Congress sanctions a new scheme, something which is not contemplated in the megaproject. This section of Milei's initiative was objected to by the opposition.
“And if you want them to recover purchasing power, you have to add an additional seasoning. But what cannot be allowed is discretion,” he concluded.
The "roadmap" of Economy to reach "zero deficit"
In January, the Government supported the Anses discretionary bonus scheme , which was the way in which in recent years the Executive in hands of Alberto Fernández ensured that the result of quarterly mobility - which systematically lost in the context of inflationary acceleration - is not so far behind in the race against prices, but only for the lowest pensions. In January Anses paid the same 55 thousand pesos that he had paid in December and it is expected that in February it will be, a priori, a similar sum. The new section of the current formula should have an impact in March, unless it is repealed in Congress.
The second and fourth scenarios could be the closest to what results from the back-and-forth between the ruling party and the opposition, which is pushing for a commitment from the Executive to not result in retirements falling behind prices. The second scenario proposed by the OPC would imply, according to its estimates, “recalculate each month the guaranteed minimum amount so that it is adjusted to inflation and consequently grant increases only to those who are receiving an income lower than the new guaranteed minimum”, without granting bonuses.
“This scenario would imply the flattening of the distribution of pension benefits since only those in the situation would receive increases . a>Gabriel Esterelles..Gabriel Esterelles (income below the new monthly guaranteed minimum adjusted for inflation) in the first month, adding in the following month those who, having not received an increase the previous month, they are now receiving salaries below the adjusted minimum salary, and so on,” explained the office headed by the economist most unfavorable (having earned below the new monthly guaranteed minimum adjusted for inflation) in the first month, adding in the following month those who, not having received an increase in the previous month, are now earning below the adjusted minimum, and so on," explained the office headed by economist Gabriel Esterelles.
Luis Caputo hopes to bring public accounts into financial balance in the first year of Javier Milei's mandate. (Nicholas Stulberg)
“The hypothetical granting of monthly increases in line with prices only to those who receive the lowest pension benefits and/or family allowances would imply a reduction of 1 percentage point in terms of GDP (it would go from 6% to 5 %) of Social Security benefits and a reduction of 0.5 percentage points in current transfers (since bonuses would not be provided). These theoretical variations, if the remaining variables are kept constant, would result in an Anses surplus of 1.2% of GDP ”, they measured.
This possibility would ultimately imply a lower expense for the Treasury. There would, in any case, be a flattening of the pension pyramid and a loss of purchasing power of assets. “Those who received the minimum salary in the first month would not have a loss of purchasing power, while those who received values equivalent to 3 or more minimum salaries in the first month would have a loss of purchasing power of the order of 69 .9 percent. The remaining beneficiaries would present a loss of purchasing power between 0 and 69.9% throughout the year,” the OPC estimated.
The fourth scenario, with inflation increases for all pensions, would have a greater fiscal impact. “Social Security benefits should grow by 1 percentage point in terms of GDP, although not granting bonuses would reduce current transfers by 0.5 percentage points, so in net terms the current deficit of 0.3% would be would increase until reaching 0.8% of GDP”, the OPC calculated. “Although this would imply greater spending for the National Public Administration, no beneficiary of the national pension system would lose purchasing power, regardless of their income level,” they concluded.
There are three other tax elements that have a central relevance in the fiscal balance plan for this year according to Caputo's roadmap. Two of them are in the hands of Congress: the reversion to the elimination of the fourth category of the Income tax (implies 0.4% of GDP ) and the package that includes the advance payment of Personal Assets until 2027, the laundering< a i=6> of assets and the moratorium on taxes (another 0.5% of GDP). The only one that could be activated by the Executive was the increase in the iCOUNTRY tax up to 17.5% rate for all imports. With this measure, the Government secured extra income for 0.8% of GDP.
Source:
Ley ómnibus: la negociación con la oposición podría hacer perder al Gobierno parte del plan de ajuste fiscal
Las jubilaciones y las retenciones explican casi 1% del PBI en el “excel” para terminar con el déficit que planteó el equipo económico. Cuáles son los cambios que discute el Congreso
www.infobae.com
January 22, 2024
Retirements and withholdings explain almost 1% of GDP in the “excel” to end the deficit proposed by the economic team. What changes are being discussed by Congress?
By Mariano Boettner
The ruling party and the opposition define how the omnibus law will be before its treatment in the Chamber of Deputies (Maximiliano Luna)
The give and take that the ruling party and the opposition rush in the Chamber of Deputies to shape the treatment that the omnibus law will have this week could reconfigure the fiscal roadmap that the Minister of Economy Luis Caputo planned for these first months of Javier Milei's government.
The different chapters of the mega project that have a fiscal impact could experience, as a result of the negotiation still underway, a reformatting that forces them to “do the numbers” again and distribute otherwise the weight of the adjustment in other areas of public spending.
There are two elements that appear to be the most discussed in fiscal terms between La Libertad Avanza and the opposition blocs that seek to accompany at least part of the omnibus law so that the Executive Branch has room for economic maneuver in its first year of mandate. This is the chapter on export duties, in which the Government determined a general increase in withholdings that aroused rejection in different sectors and, on the other, a sensitive spending item such as pensions.
Caputo's “Excel” indicates, if there were no changes such as those discussed in the Congressional offices, that a relevant part of the financial balance aimed at this year is based on these two factors and represents close to one percentage point of GDP, about 1.7 trillion (millions of millions) pesos. Modifications in these two aspects would make the government need to deepen budget pruning in other areas of spending, a scenario that has already been exposed Infobae. Subsidies would appear there (whose unpleasant counterpart would be a more rapid increase in electricity, gas and transportation rates), public works and transfers to provinces such as compensation.
However, according to the roadmap proposed by the economic team, retirements and pensions have a weight of 0.4% between the 5.2 points of the Product that make up the total fiscal adjustment. The omnibus law provides for the suspension of the current automatic updating formula to make way for discretionary increases by the Executive Branch until Congress sanctions a new scheme, something which is not contemplated in the megaproject. This section of Milei's initiative was objected to by the opposition.
Guarantee for retirees
This Sunday, the national senator and president of the UCR Martín Lousteau stated in dialogue with the project must “guarantee that retirees do not lose purchasing power. In fact, retirees should recover purchasing power. And he assured that for this it would be necessary “a formula that can be adjusted by CPI or by the same index as the UVA” Infobae“And if you want them to recover purchasing power, you have to add an additional seasoning. But what cannot be allowed is discretion,” he concluded.
The "roadmap" of Economy to reach "zero deficit"
In January, the Government supported the Anses discretionary bonus scheme , which was the way in which in recent years the Executive in hands of Alberto Fernández ensured that the result of quarterly mobility - which systematically lost in the context of inflationary acceleration - is not so far behind in the race against prices, but only for the lowest pensions. In January Anses paid the same 55 thousand pesos that he had paid in December and it is expected that in February it will be, a priori, a similar sum. The new section of the current formula should have an impact in March, unless it is repealed in Congress.
The president of the Chamber of Deputies Martín Menem announced this Sunday that the retirement issue is part of the negotiations and that there are different options on table. “There are different proposals, we are analyzing which one fits best so that it does not harm workers more,” he said in statements to Radio Miter.
Scenarios
A report from the Congressional Budget Office (CPO) prepared at the request of the plenary committee that in the last two weeks analyzed the megabill estimated, based on different scenarios, how a change in the salary payment scheme, different from the one that exists today, would impact on retirement spending. The OPC drew up four hypothetical scenarios : that retirement spending remains frozen, increases due to inflation only for the lowest salaries, increases according to growth in the income of Anses, and increases due to inflation for all pensions.The second and fourth scenarios could be the closest to what results from the back-and-forth between the ruling party and the opposition, which is pushing for a commitment from the Executive to not result in retirements falling behind prices. The second scenario proposed by the OPC would imply, according to its estimates, “recalculate each month the guaranteed minimum amount so that it is adjusted to inflation and consequently grant increases only to those who are receiving an income lower than the new guaranteed minimum”, without granting bonuses.
“This scenario would imply the flattening of the distribution of pension benefits since only those in the situation would receive increases . a>Gabriel Esterelles..Gabriel Esterelles (income below the new monthly guaranteed minimum adjusted for inflation) in the first month, adding in the following month those who, having not received an increase the previous month, they are now receiving salaries below the adjusted minimum salary, and so on,” explained the office headed by the economist most unfavorable (having earned below the new monthly guaranteed minimum adjusted for inflation) in the first month, adding in the following month those who, not having received an increase in the previous month, are now earning below the adjusted minimum, and so on," explained the office headed by economist Gabriel Esterelles.
Luis Caputo hopes to bring public accounts into financial balance in the first year of Javier Milei's mandate. (Nicholas Stulberg)
“The hypothetical granting of monthly increases in line with prices only to those who receive the lowest pension benefits and/or family allowances would imply a reduction of 1 percentage point in terms of GDP (it would go from 6% to 5 %) of Social Security benefits and a reduction of 0.5 percentage points in current transfers (since bonuses would not be provided). These theoretical variations, if the remaining variables are kept constant, would result in an Anses surplus of 1.2% of GDP ”, they measured.
This possibility would ultimately imply a lower expense for the Treasury. There would, in any case, be a flattening of the pension pyramid and a loss of purchasing power of assets. “Those who received the minimum salary in the first month would not have a loss of purchasing power, while those who received values equivalent to 3 or more minimum salaries in the first month would have a loss of purchasing power of the order of 69 .9 percent. The remaining beneficiaries would present a loss of purchasing power between 0 and 69.9% throughout the year,” the OPC estimated.
The fourth scenario, with inflation increases for all pensions, would have a greater fiscal impact. “Social Security benefits should grow by 1 percentage point in terms of GDP, although not granting bonuses would reduce current transfers by 0.5 percentage points, so in net terms the current deficit of 0.3% would be would increase until reaching 0.8% of GDP”, the OPC calculated. “Although this would imply greater spending for the National Public Administration, no beneficiary of the national pension system would lose purchasing power, regardless of their income level,” they concluded.
Withholdings
Regarding withholdings, the opposition claim consists of an expansion of the list of regional economies to be exempt from export duties. The megabill includes a general readjustment of up to 15% for all exportable products, although it has four distinctive factors for this issue: that soybean byproducts (oil or flour) go from being taxed at 31% to 33%, the same as beans; that a group of regional economies do not pay anything (olive, rice, bovine hides, dairy, fruit, horticulture, beans, lentils, peas, potatoes, garlic , chickpeas, honey, sugar, yerba mate, tea, horses and wool); maintain mining and hydrocarbon rates; and 8% for the wine and lemon complex.Official calculations indicate that the increase in export duties would contribute another 0.5% of GDP in the general fiscal adjustment plan. An estimate also made by the OPC in the same request made by the deputies during the debate in committees placed that figure at 0.42% of the Product. “Some of the sections that could contribute the most to the increase in revenue are already among those that pay the most rights,” the study notes. Among them, cereals, animal and vegetable fats and oils, and soy by-products. A sector that exports, which today has little weight in the total contribution of withholdings and that would increase its participation is the automotive industry, which would go from paying between 0 and 4.5% rate to 15 percent.
There are three other tax elements that have a central relevance in the fiscal balance plan for this year according to Caputo's roadmap. Two of them are in the hands of Congress: the reversion to the elimination of the fourth category of the Income tax (implies 0.4% of GDP ) and the package that includes the advance payment of Personal Assets until 2027, the laundering< a i=6> of assets and the moratorium on taxes (another 0.5% of GDP). The only one that could be activated by the Executive was the increase in the iCOUNTRY tax up to 17.5% rate for all imports. With this measure, the Government secured extra income for 0.8% of GDP.
