Argentine collection breaks record in 2007

2007 collection

Tax collection beat a new record in 2007, adding up to ARG$199.78 billions, 33.2 per cent more than in 2006. Moreover, according to data disclosed yesterday by Federal Tax Revenue Agency (AFIP, in its Spanish acronym), 2007 figure exceeded by ARG$30 billions the amount originally envisaged in Budget Act.

During December, also a record, a 39-per cent rise with respect to the previous year was posted, which is translated into ARG$19.62 billion revenue.

Good performance of the last month of the year stemmed from greater consumption due to festive season, from income tax and again from boom of foreign prices, which in turn results in an increase in withholding rates. Collection top was posted in May last year, settling at ARG$18.87 billions.

In this way, VTA, income tax and export rights explain 75 per cent of 2007 increase. In this sense, the effect of changing percentages of withholdings plus soy record prices mirrors again the tail wind favouring Argentina. During November, ARG$1.35 billion was accumulated, thus entailing a 106.4-per cent increase against the same period of 2006.

As regards VAT, good performance of November sales plus inflation increase translate into a 37.1-per cent rise in this tax's collection with respect to the last month of 2006. In that way, ARG$1.72 billion came in. "Inflation accompanies development in VAT or check tax collection. It's related to a growing economy," Alberto Abad, head of AFIP, explained in a press conference together with Treasury Secretary, Juan Carlos Pezoa, National Revenue Deputy Secretary, Mario Presa, and the head of the General Tax Board (DGI, in its Spanish acronym), Horacio Castagnola, where they presented data about 2007 collection.

When asked about possible changes in tax structure to recompose deterioration in fiscal result, Pezoa signalled: "Taxes will gradually adapt, depending on reality, but we shouldn't expect anything surprising."

Within VAT, and mirroring greater level of trade exchange, Customs added up to ARG$742 millions, 45.1 per cent more than in December last year. Another piece of information to highlight is return to exporters for such tax, crashing 58.6 per cent, entailing ARG$205 millions less for the Internal Revenue Service.

Greater revenue

Income Tax posted an interannual hike of 36.6 per cent, favouring the coffers with ARG$1.04 billion. "This increase stems from greater revenues thanks to companies' advances due to tax increase," AFIP officials explain. Moreover, they estimate that, after non-taxable threshold amount was modified, the entity has stopped receiving ARG$1 billion.

For their part, personal contributions increased 29.7 per cent (totalling ARG$476.3 millions); check tax, 17 per cent (ARG$204.3 millions); and import rights, 42.1 per cent (ARG$184.2 millions more). Sharp rise of the latter mirrors mounting trend in imports.

Abad stressed again, as he did before, that collection growth stemmed from three pillars. "First, the economic rebound; then, taxpayers' performance; and, finally, a more efficient tax management," he signalled.

For 2008, AFIP's budget goal settles at ARG$233 billions and Abad estimated that "prospects are highly positive." Again, this is the undervalued estimate, since real collection should go beyond ARG$250 billions.