Amidst Turmoil in Argentina, Tax Reformers Spearhead Change

When Argentinians voiced their hunger for change by electing libertarian Javier Milei to the presidency, it marked a sea change in voters’ willingness to listen to new economic ideas.

The Argentinian public’s receptiveness to fiscal reform comes against the backdrop of a 221% inflation rate in Latin America’s third largest economy. Argentina also has the dubious distinction of having the second highest tax burden in the world. According to World Bank calculations, the country’s corporate tax rate can be as high as 106% of commercial profits once each level of government has taken their bite of the apple.

Atlas Network partners Asociación Argentina de Contribuyentes (AAC) have been working successfully to reverse the tax tide and put money back into Argentinians pockets. To do so, AAC needed to navigate choppy political waters in bringing together factions on the left and the right in an effort to repeal unjust tax schemes.

A key legislative victory for AAC was the repeal of a tax grab applied to credit card statements in Buenos Aires. The law had levied the arbitrary tax on all credit card statements in the country's capital. AAC’s efforts to repeal and then refund the taxes drew support across the political divide. The result was a $300 million dollar annual tax saving for the city’s three million residents.

By implementing an evidence-based strategy validated by third-party data, AAC built an unlikely coalition across the political spectrum that helped fuel the tax reform movement now unfolding in the once-prosperous country. In the period prior to his election, Milei supported the AAC’s investigation to review the way in which the federal government allocates the taxes it collects and distributes to the provinces. This system—called “co-participation”—is now a high priority for the government thanks to AAC’s focus on the issue.

Established in 2020 by its directors Jonas Torrico and Pablo Dono, AAC emerged with the purpose of taking the defense of freedom and private property from the level of ideas to turning them into public policies sanctioned by law. By demonstrating how the national government was consuming an inordinate share of regional tax revenues, AAC argued for a province-based system that would return more money to Argentina’s regions, encouraging regional tax competition and promoting economic growth.

Noting that Argentina’s taxation woes run deep, Torrico and Dono hope AAC can keep momentum and replicate its success as the country moves towards building a more competitive tax system. To do so, it will have to continue to build nonpartisan alliances.

“We have managed to leave hundreds of millions of dollars in the hands of taxpayers,” Dono said, “something that has rarely happened in the country, and for which it was necessary to create consensus as has rarely been achieved, an experience that we hope to be able to repeat in the future. The actions carried out by the AAC during the last 3 years have generated savings for Argentine taxpayers of more than 4500 million USD annually”

Boasting one of the most robust Latin American economies throughout much of its history, Argentina’s economy is today mired in chaos. Decades of ill-conceived fiscal policies has left average Argentinians at the mercy of hyper-inflation, while private enterprise struggles with massive tax burdens and regulatory barriers to economic activity. That’s why the overall impact of AAC goes much deeper than tax reform.

By creating a coalition that brought together stakeholders from across the political divide, the organization is fostering hope for further economic reforms that can create a healthier climate for free enterprise amid tremendous economic uncertainty.

AAC’s work has been supported through grants and skills-based training opportunities from Atlas Network. Their success has garnered them praise and even awards from lawmakers, media and non-profit foundations, thus leading them to be considered by the Argentine Congress as a Center of Excellence in the creation of public policies. Now, their successful tax rollback and its innovative strategies have made the organization a finalist for Atlas Network’s 2024 Latin American Liberty Award. The winner of this year’s award will be announced at the 2024 Latin America Liberty Forum in San José, Costa Rica on March 21.