Collection and tourist dollar, warning lights for Massa

A reading between the lines of the July tax collection data makes it clear what they will be the priorities of Sergio Massa’s management as the new Minister of Economy: while the main variation in income was Profitsthere was a rise in taxes linked to consumption -such as the VAT– and tax revenue from export withholdings stagnated.

Worse still, the explosive growth of the COUNTRY tax allows us to anticipate that in July it was registered a record outflow of about $1 billionfor travel and card payments abroad.

In short, tax collection gives a picture of the situation in which the economy finds itself: stagnant exports despite record international prices, dollars escaping from the Central Bank at full speed due to the tourism category, evolution of sales in the internal market – a reflection of the “flight towards consumption” – and financial profits of the companies.

The The most impressive fact is the PAIS taxthe 30% charged to tourists, savers and buyers of foreign merchandise through international services. recorded a explosive growth of 69% in just one month, a symptom of the acceleration with which retailers began to demand dollars, partly due to a seasonal issue – the winter holidays – but also encouraged by the widening of the exchange rate gap and the suspicion of a new tightening of the stocks.

But, in addition, another aggravating circumstance must be considered: the large increase occurred despite the fact that former minister Silvina Batakis implemented a rise of 10 points -from 35% to 45%- in the perception of Profits for those who acquire dollars for tourism or consumption abroad. In addition, credit card financing for the purchase of products in free shops had been prohibited.

The result speaks clearly about the minimal dissuasive effect that these measures had when Argentines take advantage of the distortion of the exchange market, which supposes a subsidy for the purchase of air tickets and goods from abroad.

Acceleration in the demand for dollars

Speaking in numbers, the $41,795 collected in July by the PAIS tax means that Argentines gave the Central Bank $139,316 million, which, converted at the average exchange rate for the month, gives an outflow of US$1.03 billion.

It is an impressive rise, given that a worrying figure had been registered in June – US $ 655 million – but it is small compared to the July record. In year-on-year terms, the demand for dollars by retailers in July grew at a staggering 318% annual rate, which makes it, by far, the fastest growing tribute in the AFIP coffers.

The post-pandemic tourist rebound, a headache for Massa: in July the demand skyrocketed above US $ 1,000 million

Put in other terms, the PAIS tax now represents 2.4% of the total “tax cake” of the AFIP, when a year ago its participation was barely 1%.

Must date back to August 2020 to see such a large figure: at that time there was no outflow of tourists, due to the health closure imposed by the pandemic, but there was still some laxity in the sale of the US$200 quota at the official exchange rate. It was thus that the BCRA registered a rapid loss of reserves and then a new turn was given to the stocks, with tougher requirements for authorization to save foreign currencyin addition to the establishment of the advanced perception for the income tax.

As always happens with the PAIS tax, it has the peculiarity that its growth is never a cause for celebration but rather for concern, because it sets the tone for the weakening of the reserve position in the Central Bank.

So far this year, official information indicates that the foreign currency that “fled” for the item “trips, tickets and other card payments” accumulates US $ 3,914 million in the first half. If the demand for July is added, the account in the accumulated of seven months it will give about US$4,940 million.

Massa and his collaborators must be looking closely at this figure: if changes are not implemented, they risk that this record of US $ 1,000 million per month is established as the new standard.

It would imply that, in the remainder of the year, the BCRA must sacrifice reserves for US$5 billion to satisfy retailers. And there are plenty of reasons to think that this demand will remain high: to the typical purchase that takes place towards the end of the year due to the anticipation of the summer holidays, this year the extraordinary event of the World Cup in Qatar -and FIFA reported that the national team is the one that has demanded the most tickets, only behind the organizing country.

A priority for Massa

In short, if the current trend is not stopped, Argentina will end the year with an outflow of US$10,000 million for tourism and purchases from abroad, a level that is already close to the one that existed at the end of the macrista administration, when the free market for the dollar was in force and high rates of tourist departures were recorded.

To have a reference of what that figure implies, it would not only be double the reinforcement of reserves that the International Monetary Fund demands from the Central Bank, but it would be 25% higher than what the country spends on imported gas and other fuels, the big stone in the shoe for this year’s economic program.

Sergio Massa assumes the position of minister with an urgent priority: to shore up the reserves of the Central Bank, for which he will try to limit the outflow of foreign currency from tourism and offer incentives for agricultural exports

Sergio Massa assumes the position of minister with an urgent priority: to shore up the reserves of the Central Bank, for which he will try to limit the outflow of foreign currency from tourism and offer incentives for agricultural exports

These numbers are what fuel speculation about urgent measures to be adopted by Massa after his assumptionwith the aim of closing the fissure through which dollars bought by retailers go. For a government that is suffering a real “dollar distribution bid” by industrial sectors that ask for priority to buy supplies abroad, it is clear that the first item to cut is the one that is not directly linked to production.

Two years ago, Alberto Fernandez He expressed it graphically: “Dollars should be used to produce and not to save.” And, despite that warning, he failed to curb the outflow of foreign exchange, which earned him public reprimands from Cristina Kirchnerwho called for measures to “end the national sport of keeping the reserves of the Central Bank”.

And now, when the reserves of the Central Bank have reached a critical level -there are economists who affirm that net reserves are already in negative territory-, it is evident that there will be new measures to channel the scarce foreign currency towards priority activities. What is not defined is the method: for weeks the possibility has been raised that tourists pay your expenses dollarized to the conversion of the MEP dollar.

It is an issue that may have regulatory difficulties, since the way in which credit cards must convert expenses into foreign currency to be charged in pesos is established by law.

Specifically, the possibility of a breakdown of the foreign exchange marketby which a dollar set by the BCRA would govern only for foreign trade and state debt operations, while another market would be freed to supply and demand, to channel savings and tourism.

It is one of the urgent issues to be defined by Massa, who knows that he has to urgently communicate the will to generate a turning point in the Central reserves.

Retentions, down

The other part of the exchange problem, that of the supply of dollars, is also reflected in the tax collection data. The income of pesos from export withholdings is reaching minimum levels So far in the administration of Alberto Fernández, a symptom of the existing disincentive for agricultural producers to liquidate their holdings.

The $110,414 million raised in July represent a year-on-year drop in real termswhen inflation is discounted. It only rose 44%, when annualized inflation to July is estimated at 45%, and in a context in which total taxes rise to a vigorous 87%.

The other side of the collection of soybeans in silobags: the collection for export withholdings fell in year-on-year terms, an unusual situation at a time of record prices

The other side of the collection of soybeans in silobags: the collection for export withholdings fell in year-on-year terms, an unusual situation at a time of record prices

At its most relevant moment, the item of export withholdings represented more than 10% of the total in the AFIP box, but now it fell to 6.3%.

And the most striking thing is that this retraction occurs at a time of record prices in the global market for agricultural raw materials. In other words, it is evident that the gap between the official exchange rate and the parallel dollar is acting like a dissuasive to remove the beans from the silobags.

The calculations of the experts in the agricultural market indicate that, in the case of soybeans, after applying the withholdings and paying the dollars to the BCRA at the official exchange rate, what remains in the pocket of the agricultural producer is barely 27 % of the international price.

This is what leads to the other Massa measure that has generated expectations in the market: an incentive for exports that improves the offer made weekly by the BCRA and that in the agricultural field was considered a “patch” that does not substantially improve commercial terms.

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