DIGITAL PAYMENT SHOULD NOT BE ONLY FOR WAITERS

Through the Emergency Necessity Decree (DNU) No. 731/24, the option of paying tips by digital means is enabled. That is, customers will have the possibility of leaving tips with debit or credit cards or digital wallets. For this purpose, the DNU modifies the Labor Contract Law stipulating that tips are not part of the salary. In this way, tips are exempted from the payment of social security contributions and are not considered for the calculation of severance payments set on labor regulations.

The other aspect that the DNU contemplates, in order to make this option operative, is to order debit and credit card and digital wallet administrators to implement special accounts for the crediting of tips. These accounts will not be subject to any type of deduction by the employer, nor by the administrators charging their commission. In other words, these special accounts will be totally free of charge.

A third, much more important and complex point –which the DNU does not address– is to eliminate the tax impositions that apply to the use of digital money. For reference, a store, bar or restaurant that charges a bill by a digital payment suffers the following tax deductions:

• For Check tax suffers a deduction of 2%.
• For advance payment of VAT and Income tax, it suffers another deduction that can be 1% if the payment is by debit card or 4% if it is by credit card.
• For advance payment of provincial Sales tax, another deduction is made, which varies according to the province, but is around 5%.

These data show that by avoiding digital payments using cash it is possible to avoid advance tax payments that can exceed 10% of the bill. In addition, there is a no less important administrative and legal negative impact. Advance payments are implemented based on very complex red-tape rules, which often prevent them from being deducted in the final tax settlement. Therefore, special tipping accounts –to be operative– should also be exempted from these tax deductions.

Beyond the progress made with tips, a more general and ambitious transformation in eliminating obstacles to the use of digital money is still pending. On the one hand, it is necessary to change the logic of the Check tax. Instead of applying it to payments with digital money, it should be applied to cash withdrawals. On the other hand, it is necessary to make the national VAT absorb the provincial Sales tax. This is the only way to dismantle the paraphernalia of advance payment regimes that are the mainstay of Sale tax collection.

In order to make the digital payment of tips viable, it is enough to establish exceptions by DNU. In order to promote the massive use of digital money, a more comprehensive tax system reorganization is needed. The starting point is not to overlook the fact that the original taxation competencies belong to the provinces. So, no level of government can unilaterally make the arrangement. A tax coordination agreement is needed with a majority of provinces –not necessarily all of them– to achieve a simpler and less distorting tax system.

It makes no sense to wait for public expenditure reductions to lower distortionary taxes. It is essential to move forward, at the same time, replacing bad taxes with better taxes. The most obvious case is VAT, which should absorb provincial Sales taxes. Without this unification, there is no chance of eliminating Sales tax with its perverse regimes of advance payments. To facilitate the Sale tax absorption by VAT, it is essential to promote the use of digital money and discourage the use of cash. This will help to lower tax evasion and, in this way, reduce the increase in the VAT rate that will be necessary to absorb Sales tax.