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Tax pressure does not solve the problem

Although it may seem very simple, either we increase revenue or cut expenses.

Politics and Economics

Many are talking with concern about the tax burden that is coming for 2019. The concern is not about the financial risk of companies but because they are aware that this does not solve the problem.

The problem lies in the state's current account fiscal deficit. In other words, what you enter every month is not enough to cover the same month's expenses. And as you can imagine, that problem is repeated every 30 days, 12 times a year, for good presidential terms.

This government, in its economic syncericide, decides not to borrow long-term debt to pay the debts for each month (logical, given that not only interest would be very expensive, but also a short sheet solution). But as opposed to this syncericide, it also does not make the adjustment it needs to reverse the situation, which, without political demagogy, we are talking about removing subsidies, layoffs of state employees, curbing free events and limiting the subsidy of the deficit of state-owned enterprises.

For 2020 Macri has two options to mask this crisis: the  menemist  strategy of long-term indebtedness (yes, more than it already did, because the rich world needs to finance the emerging in a globalisation crisis that is far more complete than ours), or a more  Venezuelan  one to nationalize the income of private companies. In the first we would be selling the country and in the second merging it, but in both the consequence would be a good electoral forecast, which is what every politician is looking for.

Quiet, there are alternatives with happy endings. The tax increase is what sounds best to this government. Those who are already on the AFIP and ARBA radar are going to have no choice but to pay, and in a troubled Latin America it is not like in Europe that companies set up camp and move east with cheap labor.

A less demagogic and less practical alternative would be to go for 40% of the economy that is not registered to increase the tax base and no longer be a few who pay the expense of many.

And yes, although it may seem very simple, either we increase revenue or cut expenses, but both for one side and the other there are limits.

Macri may spend another year with high tax pressure, even two more, but eventually this will not resist and we will fall into a new crisis. And back to rezongar for not thinking about the long term.

Publication Date: 05/02/2019

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