In North, out of every 3 employees 2 are public 1 is private

Budget 2019 establishes that mass media companies (TV channels, radios, newspapers, magazines, digital media, etc.) will be able to take as credits of Value Added Tax (VAT) the amount paid as employer contributions to ANSES and PAMI for their employees. In this way, a distorting tax that discourages registered salaried employment (employer contributions) is articulated and subsumed into a neutral tax (VAT).

The mechanism encourages mass media companies to take more registered employees and pay better salaries since the labor taxe will be reduced. In addition, they will have the incentive to formalize their turnover since in order to take the contributions as VAT credits they necessarily have to charge VAT on their sales. The strategy is consistent and socially beneficial, but doubts arise in its sole application only in favor of media companies.

In order to evaluate the equity of its application only in media companies, it is pertinent to analyze the composition of wage-earning employment registered by regions. According to the Permanent Household Survey of INDEC in the 1st quarter of 2018, it is observed that:

• In the metropolitan area, 66% of registered employees are private and 34% are State employees.
• In the central and Patagonic region, 58% are registered private wage earners and 42% are public employees.
• In the north of the country, 41% are registered private wage earners while 59% are public employees.

These data show the deep regional differences that exist in the labor market. While in the metropolitan region 2 out of every 3 employees are private and 1 public, in the north of the country it is the reverse: 2 are public and 1 is only private. This situation is what explains the enormous development gaps between the metropolitan region and the interior of the country, especially the north. For this reason, it is urgent to implement the same measure that will be applied among media companies in the interior of the country as well, in particular, in the north of Argentina.

Until last year, Decree 814/01 was in force, which stipulated that companies could take a part of the employer’s contributions as VAT credits. The proportion was increasing depending on the distance from the metropolitan region. But the tax reform of 2017 gradually eliminated this benefit under the argument that it was replaced by a minimum non-taxable to employer’s contributions. In addition that they are two instruments that operate and have different impacts, it is striking that the benefit taken from the interior is granted in an expanded manner to media companies.

The most effective way to use public funds to promote development in the most disadvantaged regions is by lowering the labor cost. This is the genuine way to increase the region’s competitiveness by attracting investments that generate registered private jobs. On the contrary, continuing to use state resources in the poorest regions to finance public employment and welfarism, beyond the declared good intentions, perpetuates decadence. In the interior, private firms cannot offer better conditions than those offered by the public sector. In this situation, people resign themselves to living on state transfers instead of venturing or getting jobs into the private sector.

The Belgrano Plan made explicit the decision to promote a set of differential measures tending to promote the development of northern Argentina. The repeal of Decree 814/01 goes in the opposite direction and concentrating a similar mechanism for the benefit of a single sector (media companies) makes the repeal illegitimate. In order to stop deepening regional development gaps, it is essential to incorporate the scheme given to media companies as a central component of the Belgrano Plan.