By Carlos Lamiral (Originally published on Ámbito)

The agreement signed by the Argentine government with the International Monetary Fund (IMF) leaves little room to lower the tax burden, as it sets very ambitious fiscal surplus targets for 2026 and 2027.

This does not mean that some taxes can’t be lowered, as President Javier Milei proposes as one of the main pledges of his government. But if he were to do so, within the framework of a tax reform, it would mean that others would have to be raised.

The agreement stipulates that the government must achieve a primary surplus of 1.3% of Gross Domestic Product (GDP) by the end of the year, although Milei has said he aims for 1.6%. In 2026, the surplus must rise to 2.2% and in 2027, 2008, and 2009 to 2.5%. This year, after paying debt interest, the financial surplus can be zero, as it was in 2026. In 2027, 2028, and 2029, it must be 0.4% of GDP.

Milagros Gismondi is an economist at the consultancy firm Cohen Argentina. She considers the goals optimistic, although she points out that “beyond the agreement with the IMF to reduce the debt, there should be even more surpluses.”

“It’s challenging, considering the current formula (for adjusting pensions). When inflation drops, pension spending would remain stable, so on the other hand, fiscal adjustments would have to continue,” she explained in a conversation with Herald’s sister publication,  Ámbito.com.

Gismondi believes that “thinking about a 2.5% primary surplus for Argentina is not a minor task, although it is not such a simple task, especially considering that at some point there must be a scenario of tax reduction, which is so important for this government.”

“Beyond the possibility of improving the tax burden, reducing distorting taxes and raising others, the truth is that it is difficult to think about a more or less aggressive tax reduction considering that we need to have a larger primary surplus,” she added.

The Government’s Tax Reform

President Javier Milei proposed a tax reform, which, in principle, would not reduce the total burden but rather rebalance it between distorting taxes. This directly increases prices, such as the Gross Income Tax or export withholdings, and taxes that are not distorted.

The idea would be for only six or seven taxes to collect the same amount as around 30 taxes and fees currently do nationwide. This is not easy for the government because it requires the consensus of governors. For example, there is talk of replacing the Gross Income Tax with a provincial value-added tax (VAT).

The federal government has already exceeded the first-quarter target. According to an analysis by the Argentine Center for Political Economy (CEPA), at the end of the first quarter, the Ministry of Economy raised approximately AR$710 billion (US$602 million)  above the target. The IMF says that Argentina should have achieved a surplus of AR $3.64 trillion (US$3 billion) between January and March, but instead achieved AR$4.35 trillion (US$3.68 billion).

It is worth remembering that in June 2025, the Government will reinstate the export withholdings it reduced last year to stimulate the flow of dollars.