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The Government made official the reduction of the PAIS tax and an impact on prices, imports and collection is expected - Infobae
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El Gobierno oficializó la baja del impuesto PAIS y se espera un impacto en precios, importaciones y recaudación
El Poder Ejecutivo publicó esta medianoche el decreto en el Boletín Oficial. El equipo económico apunta a un efecto en el IPC y el mercado alerta por una mayor demanda de divisas
www.infobae.com
September 02, 2024
The Executive Branch published the decree in the Official Gazette at midnight. The economic team points to an effect on the CPI and the market warns of a greater demand for foreign currency.
By Mariano Boettner
Imports and freight will pay a 7.5% PAIS tax rate starting this Monday. EFE
The Government published in the early hours of this Monday the decree that formalizes the reduction of the PAIS tax rate from 17.5% to 7.5% on the use of dollars for the payment of imports and freight from abroad, so that this tax will return to the level it had before the change of command last December. The economic team expects that the measure will have an impact on prices and revenue collection . The market, meanwhile, weighs the chances of a greater demand for foreign currency for imports.
The Executive Branch published decree 777/202 in the Official Gazette at midnight , marking the reduction in the PAIS tax rate, thereby fulfilling the promise it had made during the discussion of the Basic Law , when it anticipated that it would activate this reduction if Congress approved this norm. Two months later, this measure will become effective and will impact on decisive variables for the economy.
"The rates established in subsections d) and e), both of the first paragraph of article 13 bis of Title III of Decree No. 99 of December 27, 2019 and its amendments, are reduced to SEVEN POINT FIVE PERCENT (7.5%)," stated the measure that was made official this Monday.
Among the considerations, the Executive Branch pointed out that "within the framework of the measures adopted with the objective of contributing to the stabilization of prices, it is necessary to reduce the rate of the PAÍS Tax for the purchase of foreign currency notes and foreign currency carried out by residents in the country for the payment of obligations for the import of certain goods and for the acquisition of freight services and other transportation services for foreign trade operations."
On the one hand, the economic team hopes that this tax reduction will act as a battering ram to break the inflationary inertia of the last three months, in which the rise in core prices remained stable. The bet is that September will show a lower pace of prices than July (4%) and August, a month for which Minister Luis Caputo anticipated that a similar figure is expected.
The market is somewhat more skeptical about a clear effect on prices and finds it difficult to measure in these terms. “The impact on inflation is difficult to estimate: it will depend on the cost structure of the different goods and services that incorporate imported goods, and on the degree of competition that the rest present to enable or not the recomposition of profit margins. We understand that it will not be significant, we do not expect nominal price reductions , in any case a slowdown in scheduled adjustments,” LCG stated in a report.
The Central Bank could experience greater demand pressure for foreign currency due to the reduction of the PAIS tax. Shutterstock
“The clearest impact should be seen in wholesale prices, not only of imported products that have a weighting of 7.3% in the Indec IPIM and that had already been rising below the rate of the crawling peg since March, but also of national manufactured products that have an imported cost component,” 1816 mentioned, meanwhile. That is why he estimated that “the magnitude of the transfer to prices is inherently difficult to estimate for the simple fact that in our economic history we have no experience of nominal appreciation in a managed exchange rate regime,” he pointed out.
A study by Banco Provincia measured the impact of exchange rate appreciations on prices so far this century. It found that between 2002 and 2023, in 18 months there was a drop in the nominal exchange rate of more than 2%, in all cases in contexts of an economy without restrictions. One of the conclusions was that only in April 2003 (the CPI fell 0.4% and the dollar, 4%), in no other of those months was there a contraction in prices at a general level. “They are not harmless either: they generate 'buffers' for the following months, moderating future dynamics, but without having an effect similar to that of devaluations. The pass through of appreciations is much lower than that of devaluations,” said Bapro.
The IEB Group also emphasized this particularity: that the impact on prices could be more delayed than immediate. “It provides a certain cushion to avoid markups without loss of margins, which could push future inflation data downwards ,” they said. “However, this is not the only way in which the reduction of the tax could help control inflation. By lowering the cost of importing not only intermediate goods, but also final goods, it will put pressure on local producers,” they said. Part of that conversation already took place last week between supermarket entrepreneurs and the national government.
Less revenue and more imports?
Two other clear effects of the reduction of the PAIS tax are identified in the fiscal and exchange aspects. Regarding the first aspect, LCG estimates that the revenue that the treasury will stop receiving due to the reduction in rates is 0.4% of GDP .Invecq agreed with that figure - which corresponds to the remainder of 2024 - and detailed that the PAIS tax represented 6.3% of the State's total income between January and July. "The reduction in the rate will imply a loss of approximately USD 2.5 billion (0.4% of GDP) for the remainder of 2024. In any case, the objective of fiscal balance is not seriously compromised," said the consultancy firm.
In this regard, the Government believes that the reduction that will take effect from today should not jeopardize the fiscal surplus due to the compensation of income that the treasury will have with the measures of the fiscal package - mainly the tax moratorium - and the readjustment of the income tax.
The market believes that the effect on inflation could be more diffuse but that it would help to mitigate increases in the future. .EFE
In terms of exchange rates, there is a competitiveness effect that in the market, they believe, would imply greater demand for foreign currency for imports. “The import exchange rate will fall to $1,025 , a level similar in real terms to that of the previous PASO in August 2023,” indicated 1816. “In the coming weeks we will know to what extent the recent dynamics of the spot (official exchange market) reflect that importers have deferred their access to the MULC until after the tax reduction,” he said. The market speculation was that the Central Bank managed to obtain foreign currency throughout August due to import decisions postponed until September.
“The fall in the price of the 'importer dollar' - it will go from $1,120 to $1,024 - would translate into an increase in foreign purchases , at a time when an increase was already expected as a result of the incipient economic recovery and the new payment scheme that has been in effect since August. In relation to the latter, a significant jump in the demand for foreign currency can be expected during September-November, when a remainder of the 25% installments from May-July and the new 50% installments will still have to be paid. The trade balance of goods - cash basis - could be negative by more than USD 4,000 M during those three months,” said Invecq.
“The reduction of the PAIS tax - and its subsequent elimination from January 1 - is undoubtedly a measure that goes in the right direction, but it puts pressure on the exchange rate in the short term - at a time when a greater demand for foreign currency was already expected. In addition, it will result in a significant loss of resources for the Treasury. The positive side? From September onwards, the prices of some goods could fall, due to the lower cost of importing; although, in this case, the final impact is less clear,” concluded the consultancy firm.
“It is possible that the sale of dollars to importers will then be reversed, with a lower PAIS Tax. It is clear that the timing of this measure, already announced and promised for some time, attempts to collaborate with the objective of further reducing monthly inflation, while imports with a lower tax burden should be offered at a lower price,” LCG concluded its analysis.
aviso_313136.pdf
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