President Javier Milei’s administration has sent a bill to Congress that would lower the income tax threshold. If approved, it would mark a change of direction: the cutoff was hoisted in September, meaning that less than 1% of Argentina’s top earners were eligible to pay the levy.

The government also promised to implement a comprehensive overhaul of Argentina’s tax system in 2025 if it meets its 2024 fiscal goals.

The drive to cut income tax was spearheaded by former Economy Minister Sergio Massa of Peronist Unión por la Patria coalition, who ran against Milei in the presidential run-off. After the changes, only those earning around 15 times the national minimum wage were eligible for the tax — an estimated 88,000 people. As a deputy, Milei voted in favor of raising the threshold.

The bill would move from a set income tax threshold to a system that depended on gross income minus social contributions. Therefore, a single person with no children would start to pay income tax when they earned around AR$1.35 million per month gross (US$1,603 at the official exchange rate, US$1,076 at the MEP rate), but the figure would rise to around AR$1.55 million per month for a married person with children, explained Gabriela Russo, president of the Professional Council of Economic Sciences of Buenos Aires City.

“It could vary depending on any deductions,” she pointed out.

The threshold is currently around AR$2.3 million. 

The bill was presented in a letter to Congress, signed by President Javier Milei, Economy Minister Luis Caputo and Chief of Staff Nicolás Posse. The officials state that Argentina is in an economic and fiscal crisis that has been “strongly aggravated” by the measures the previous government took in its last four months in power, referring to Massa’s tax cuts. 

“The effect of the adopted measures […] has had as a direct consequence a reduction in the fiscal resources of the NATIONAL STATE, elevating the already high levels of existing deficit, which complicates the development of the process of the restoration of fiscal accounts, which was started on December 10, 2023,” the letter read.

It continued by stating that income tax is the most progressive tax in Argentina’s fiscal system because it is calculated based on how much an individual earns, rather than being applied universally irrespective of income.

The government then proposed a system in which workers would only be taxed extra on their earnings above the threshold for each bracket, thereby ensuring that they never lose more in taxes than they earn by receiving a pay rise.

“The progressive nature of it had been lost, there was a flat threshold for everyone,” said Russo. “Both the deductions and the categories will be updated quarterly, so they’ll accompany inflation; they won’t remain static.” 

The government also promised a comprehensive overhaul of the tax system to simplify it, expand the base of registered taxpayers, and reduce tax pressure starting in 2025, subject to the fulfillment of the government’s fiscal targets in 2024.