Report Nº: 102424/08/2023


Sale tax is questioned because of its accumulation in the successive stages of commercialization. But the main reason why it should be eliminated is because of the multiple payments in advance regimes that the tax has. These regimes are very bureaucratic and generate permanent balances in favor of the taxpayer.       

The sale tax is a provincial tax levied on sales. It is accrued monthly as a percentage of sales. Notwithstanding this, throughout the month the taxpayer is subject to a series of Advance Payment Regimes (RPA). Therefore, the amount that the taxpayer is obliged to pay arises from the difference between the amount of the tax accrued minus the sum of all the advance payments applied during the month.

Each province regulates the tax with total autonomy. They establish rates by activity, special treatments, exemptions, and invoicing ranges. In the same sense, each province has the power to regulate its RPAs. The RPAs are classified into withholding regimes (the seller suffers a deduction from the sale price), surcharge regimes (the buyer suffers a surcharge on the purchase price), and collection regimes (the taxpayer suffers a deduction in his bank accounts). Thus, the sale tax is not a single tax but 24 taxes with 75 different RPAs, which generates an intricate bureaucratic labyrinth of provincial systems.  

Aggravating this situation, the provinces make abusive use of advance payments. To see the extent of the problem, with data from the central agency that administer these regimes, it is observed that:

  • In 10 provinces the accumulated prepayments are equivalent to less than 1 month of the accrued tax.
  • In 6 provinces the accumulated prepayments are equivalent to 1 and 2 months of the accrued tax.
  • In the remaining 8 provinces the advance payments are equivalent to more than 2 months of the accrued tax.  

These data show that only in 10 provinces the accumulated prepayments are equivalent to less than the accrued tax in the month. In these provinces, no credit balances are generated since the tax due is less than the advance payments. However, in the remaining 14 provinces, the amount advanced by taxpayers is greater than the tax payable, therefore, they accumulate credit balances. The most pathological cases are Catamarca with the equivalent of 6 months of prepayments and Misiones with one year of collection paid in advance.

The fact that the abusive use of RPAs is widespread among many provinces is another evidence that there is no “rift” in matters of bad public policies. On the contrary, broad and solid consensus prevails. This bad practice occurs in provinces governed by the Frente de Todos (to the two previous examples, there is Santiago and Formosa with 3 months, Tucumán 2 months, Chaco 1.2 months) and also in jurisdictions governed by Juntos por el Cambio (Corrientes 4 months, Mendoza 1.5 months, CABA 1.2 months). Therefore, the challenge is not –as it is generally believed– to close the “rift” but to question the wrong consensus that sustains bad policies.

There are multiple productive and social damages caused by the sale tax and its RPAs. For example, a practice widely used by businesses to avoid tax payments in advance applied by credit cards and banks is to induce the use of cash. This discouragement of the use of digital money is contradictory to the objective of fighting evasion and informality.

In the 2017 Fiscal Consensus, a reduction of sale tax rates was agreed upon. Its failure is not explained because it was partially implemented, but because of the wrong diagnosis. The average sale tax rate is 3%, that is, one-seventh of the general VAT rate. Therefore, if the problem lies in the high rates, the priority should be to lower VAT, not sale tax. The reality is that the main damage is caused by the cumbersome nature of a rudimentary tax that allows the abusive use of RPAs. In order to avoid repeating frustrations, it is necessary to be disruptive and accept that sale tax cannot be fixed. Therefore, the best alternative is to eliminate it and have it absorbed by VAT. 


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