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Inspired by Brazil, a new unified VAT model sparks debate among economists and policymakers
As Argentina grapples with a complex and fragmented tax system, a bold new proposal known as the “Super VAT” has emerged, aiming to consolidate multiple tax layers into a streamlined national model. Introduced by Osvaldo Giordano, president of the IERAL at the Mediterranean Foundation and former head of ANSES, the proposal seeks to unify three central taxes:
- Value Added Tax (VAT)
- Gross Income Tax (IIBB)
- Municipal Levies
What is the “Super VAT”?
At the core of the proposal is a Federal “Super VAT” set at 9%, which would centralize tax collection at the national level. Inspired by Brazil’s dual-layer VAT system and models in India and Canada, this new framework would allow provinces and municipalities to layer additional levies on top of the federal rate, giving local governments continued fiscal flexibility.
Tax collection would remain under the National Treasury, which would then be responsible for redistributing revenues to provinces based on a modified Federal Co-participation Law, a politically sensitive mechanism requiring consensus across jurisdictions.
Rationale Behind the Reform
Argentina’s tax system is considered inefficient, burdensome, and distorted by overlapping federal, provincial, and municipal obligations. According to the Argentine Institute of Fiscal Analysis (IARAF), just six national taxes contribute to 83% of the country’s total tax revenue, with VAT alone accounting for 32.8%. In 2024, VAT collections reached 131.3 trillion pesos, marking a 205.6% year-on-year increase.
Giordano argues that this dominance of a few taxes presents an opportunity: streamlining them into a unified system could significantly reduce business compliance costs, eliminate redundancies, and improve transparency.
Pilot programs in Córdoba province have already explored similar consolidation for small taxpayers, providing early evidence that the model could ease administrative burdens and promote higher compliance.
Milei Government’s Position: Interest, But No Commitment
Though the proposal aligns with President Javier Milei’s broader tax reform agenda, which includes eliminating up to 90% of existing taxes, the “Super VAT” has not yet been formally embraced by the government.
Economy Minister Luis Caputo recently clarified via social media that the “Super VAT” is not under current consideration and that no formal proposal has been received from Giordano or the Mediterranean Foundation.
Despite this, the idea is gaining traction among economic analysts and think tanks, especially as Milei pushes for a leaner tax system. A comprehensive tax reform bill is expected before the summer of 2025, and many believe a VAT overhaul may be included, even under a different structure.
Challenges Ahead: Political and Fiscal Coordination
While the Super VAT promises efficiency and simplicity, it also presents substantial political hurdles. Any significant change to Argentina’s tax-sharing system would require Congressional approval and provincial buy-in, which are far from guaranteed.
Provincial governments, already wary of losing control over revenue streams, may resist a centralized approach. They fear being short-changed in redistribution or losing flexibility in tax design.
Critics also warn that a federalized VAT could disrupt municipal funding models, particularly in smaller jurisdictions dependent on Gross Income Tax or local levies.
Conclusion: Reform Momentum Grows, But Clarity Needed
Though still unofficial, the Super VAT proposal reflects Argentina’s growing appetite for tax reform. It echoes successful regional models and addresses long-standing inefficiencies in the nation’s public finance framework.
Whether it becomes part of the Milei administration’s final legislative package remains to be seen. But what is clear is this: Argentina is at a tax crossroads, and how it navigates the debate over VAT reform could shape its economic future for decades.
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