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Government defines the future of a key tax

The extension of the tax on liquid fuels expires in January. Companies have already anticipated that if there is an increase it will go directly to the pump.

The Government is currently defining the future of the tax on liquid fuels. The last extension decree that froze the tax at $27.6 from October 2022 expires in January. A 100% increase could impact a 25% price increase at the pump. The companies assure that the transfer to consumers will be immediate. The economic team analyzes it as one of the alternatives to finance the retirement of the fiscal chapter of the omnibus law.

After increases that already exceed 80% since the beginning of the government of Javier Milei, This Thursday fuels could have a new increase in consumer prices. This could happen if the Government decides not to extend the freeze on the tax on liquid fuels that has been in effect since October last year and was extended on different occasions.

“It is an alternative that is being analyzed”, acknowledge sources from the economic team when consulted by this medium. Given the withdrawal of the fiscal chapter of the omnibus law, different ways are being sought to finance the loss that not having those resources will imply for the treasury. Fuels appear as a viable tool to quickly mitigate the impact.

According to an analysis by the Argentine Institute of Fiscal Analysis, the real value of the fixed amount of the tax decreased by 85% between December 2018 and December 2023. With this scenario, the monthly collection for the tax in question decreased by a real 77% in five years. “Under the assumption of super gasoline consumption equal to that of 2018, if the government returned the real value of the tax to that of that year, it could imply extra resources for the Nation for 0.37% of GDP”estimated the IARAF report.

Furthermore, at a time of tension with the governors due to the drop in shared resources, it would imply an increase of 0.15% of GDP for the provinces and the Autonomous City of Buenos Aires. This point becomes especially relevant after, as anticipated Ambitpresidential spokesperson Manuel Adorni will confirm the withdrawal of the project to reimpose the income tax to the workers.

Law 27,430 stipulates a quarterly increase in the tax according to the Indec CPI, but due to different Executive decrees the update was postponed. So in this case, the Government would not need to go through Congress or sign any decree to increase the tax on liquid fuels. In fact, without signing a new extension, an update could be given as of Thursday.

According to IARAF calculations, a 100% increase in the tax could impact increases of 25% at the pump. So a liter of super gasoline could jump from the current $800 to around $1,000. The companies warn that they have not yet reached export parity prices and have already warned: it will go directly to the consumer.

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