Argentina’s Tax Revenues Surprise on the Downside

Argentina’s total tax revenues surprised on the downside, increasing by 36.7% y/y to 34.6 billion Argentine pesos (ARS) in August (consensus, ARS37 billion; RGE, ARS35.4 billion), easing from 40.6% y/y 3MMA. Government income benefited from strong, although decelerating, income (29% y/y), VAT (37% y/y) and social security contributions (26% y/y). Meanwhile, trade taxes buoyed at 69% y/y, as exports and import taxes increased strongly by 68% y/y and 74.5% y/y, respectively. Adjusted for official inflation, tax revenues increased by 23% y/y versus 27% y/y 3MMA; however, after adjusting for unofficial inflation of around 25% y/y, tax collection increased only around 11% y/y.

The economic recovery, elevated inflation and strong international trade continued to support government’s coffers. However, fiscal spending also remained buoyant, growing 32% on average up to July 2010 (26.7% YTD in 2009), limiting the positive effect on the fiscal stance. With the government focused on the October 2011 presidential election, there is no reason to think this trend will reverse.

Editor’s Note: This post is excerpted from a much longer analysis available exclusively to RGE Clients, LatAm Focus: Brazil Ends Tightening; Mexico’s Inflation Improves

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