Economy Minister Luis Caputo announced the government will lower the PAIS tax for imported goods and international shipping to 7.5%, after increasing it to 17.5% in December.
The PAIS tax, which applies to all U.S. dollar transactions, will not be decreased for credit or debit card purchases, nor expenses made in other countries. The PAIS tax for those types of transactions will remain at 30%. They are also charged with an extra 30% accounting for the Profits or Personal Property tax.
“I believe that in September we will see a drop in prices,” Caputo said on Wednesday, during an interview with Radio Rivadavia, adding that the government has met with representatives of different business chambers who agreed to stop “speculating” with price increases.
The minister added that the increase, which he determined, would always be temporary, to reach a fiscal surplus before passing the Bases Law.
“Nobody believed me, because everybody said that when a tax goes up in Argentina it does not go down,” said Caputo.
Economist Martín Kalos, head of the EPyCA consulting firm, said that the measure could reduce monthly inflation by 0.7% in September. Kalos added that it would be hard to calculate how much it would reduce the price of each imported good or national product with imported components due to the difference in their cost structures.
“Even if you reduce 10% of the import price, it does not impact 10% of the final sale price,” he told the Herald. “It will have a greater impact on finished imported products — consumer electronics, for example.”
Daniel Rosato, president of the Argentine Industrial SME Association (IPA), said that the measure could have a “double impact” on the Argentine industry, as it will reduce costs, allowing companies to import cheaper raw materials. “But, on the other hand, importers will use [that benefit] to import finished products that are also produced in Argentina — that will lead to competition becoming extremely unfair,” he said.
Rosato said that countries such as the United States and China have import fees to protect their national industries. “We should go down that road,” he said.
Economist Fernando Marull, head of the FMyA consulting firm, said on X that the PAIS tax decrease would reduce tax revenue by around 0.4% of GDP, cause an import increase of US$1 billion, and make inflation lower by 0.7%.
A spokesperson for the ministry did not immediately respond when the Herald asked whether the government was planning measures to compensate for the reduction in tax revenue.
Analyzing numbers from the Eco Go consulting firm, economist Juan Tellechea said the government’s strategy to lower inflation every month has found its lower limit at 4%. “We will see if lowering the PAÍS tax helps to pierce it in September,” he said in a post on X.
Luciano Galfione, president of the Pro Tejer Foundation, which groups textile manufacturing companies, also said that the PAIS tax reduction could harm national industry if other measures do not accompany it.
“The measure favors the price of imported products and therefore facilitates imports to the detriment of national ones,” Galfione told the Herald. He said that the government should lower taxes and rates affecting the national industry, and apply policies to alleviate the increased costs caused by the peso devaluation and inflation.
“This prevents the national industry from being competitive, during a recession where thousands of jobs are at stake.”