President Javier Milei enjoys provoking audiences both in Argentina and internationally with his assertion, “taxes are robbery and I’m saying that as the head of state.” Yet the libertarian tax authorities exerted such pressure on numerous small businesses to fulfilll their obligations that it culminated in a political issue. Aggressive enforcement tactics have incited frustration among shopkeepers and small-business owners, including numerous individuals who supported Milei with the expectation that he would reduce taxes and alleviate state intervention. Some are now reevaluating their backing in anticipation of next year’s presidential election – a cautionary indicator that led his administration to adopt a more cautious approach. Measures such as bank-account freezes, liens, and restrictions on asset sales have surged by 52 percent this year through August compared to the previous year, amounting to approximately 135,744 instances, as reported by source. On Tuesday, Economy Minister Luis Caputo announced that ARCA would suspend bank-account freezes for small businesses until at least May and extend tax repayment plans. The reversal provides a measure of relief to voters such as Vanesa Camiscia, who supported Milei three years prior. However, it is far from what she had anticipated when the outsider politician assumed office with pledges to reduce taxes and eliminate bureaucratic hurdles.
Camiscia, 38, operates a wholesale produce stand at the vibrant Mercado Abasto de Quilmes in Buenos Aires. ARCA froze her company’s bank account after she fell behind on a repayment plan, forcing her to choose between paying suppliers and keeping up with the taxman. The experience has made her rethink how she’ll vote in next year’s presidential election. “I remember Milei telling us to get ready because we were going to make a fortune,” Camiscia said, adding she won’t vote for Milei next year nor his left-wing opponents. “Now this is humiliating. They’re suffocating small businesses.” Stricter tax payment plans have helped Milei preserve his hard-fought fiscal surplus, which in turn has tamed runaway inflation. After inheriting a deep deficit three years ago, Argentina’s primary fiscal surplus so far this year is equal to about 1.2 percent of gross domestic product, while inflation has cooled to 33 percent from above 200 percent in early 2024. Milei also enjoys backing from Washington regarding this matter. The Inter-American Development Bank granted Argentina US$100 million in financing in April specifically to improve tax collection. At the same time, Argentina already has the second-highest tax burden of any Latin American country after Brazil, according to OECD data. Tougher enforcement collided with an overvalued peso, persistently high taxes, prohibitive interest rates and fewer subsidies on transportation and utilities. That cocktail is driving operating costs up and consumer spending down.
Milei’s top senator, Patricia Bullrich, applauded the pause on account freezes or embargoes, but said more measures were needed to restart economic growth that’s stagnating. Bullrich, increasingly critical of the president amid speculation of her own run for the top office next year, said she had brought up the issue for a long time. “Every business owner I talked to told us the same thing: Embargoes are killing companies,” Bullrich posted on X. The increasing strain became evident throughout the small-business sector. A survey conducted by the advocacy group Fundación Observatorio PyME revealed that 15 percent of small and medium-sized industrial firms in Argentina have encountered asset seizures or account freezes imposed by ARCA due to unpaid obligations. Seven in 10 of those companies received notices within 30 days of missing a payment. “It’s a complaint I’ve been hearing increasingly for about a year,” Pablo Dragun said before the government lifted frozen accounts. “Before, ARCA didn’t move to seize assets so quickly, almost automatically, as it does now.” Camiscia states that her company, Vanano, engaged in discussions with ARCA last year regarding a 60-installment payment plan due to tax arrears. ARCA froze the company’s bank account without prior notice, despite Camiscia’s belief that she was still in the midst of negotiating the payment plan.
She is concerned about the sustainability of her business operations in the near future. “We go to work every day as if it were the last,” she said. “We don’t know how long it will be before we go under for good.” Ahead of next year’s race, the open question is how much Milei’s moves to achieve a fiscal surplus will cost him at the ballot box in 2027, and whether the tax relief is too little too late. Since taking office, Argentina has seen a decline of more than 32,000 private sector businesses and a loss of 265,000 formal jobs, as reported by government data. “The government said the cost of disinflation would be temporary,” said Guido Zack. “But that cost has become permanent: inflation has stabilised, while costs have not eased.” Committed to reducing inflation and implementing austerity measures, Milei is facing challenges in igniting the growth he assured his electorate. Argentina’s economy is projected to grow merely 1.5 percent this year, falling short of the five percent that Milei had promised in his annual budget forecast. The economy likely entered a technical recession in the third quarter as well. Most of the pain is concentrated in Argentina’s labour-intensive sectors such as retail, construction, and manufacturing. Martín Blust observed a significant decline of 40 percent in domestic sales at his musical string business following Milei’s assumption of office. His family enterprise, Cuerdas SRL, consisting of ten members, specialises in the production of strings for guitars, basses, mandolins, and various other musical instruments.
It exports approximately 25% of its output to over a dozen nations; however, these markets have not compensated for the declines experienced in Argentina. After enduring numerous crises in Argentina since its establishment in 1952, Blust’s company ceased production on Fridays to lower labour expenses. Excluding salaries and inputs, payroll taxes and social-security contributions account for up to 30 percent of his revenue, which is twice the amount prior to Milei’s administration, according to Blust. ARCA has frozen Cuerdas’s bank account following the failure to make several tax payments. Blust states that his family-run business has liabilities amounting to 55 million pesos, which encompasses debts owed to ARCA’s legal representatives that companies are required to settle. Any funds deposited in the Cuerdas account were absorbed by the tax authority. It compelled him to request that suppliers refrain from cashing checks as he sought alternative methods for arranging payments. “Falling behind creates a huge mess – we’re not asking for the debt to be forgiven, we need more time,” Blust states. He acknowledges Milei’s decision to unfreeze bank accounts, yet remains sceptical about its potential impact on Argentina’s economic outlook. “It’s a big help but the damage is already done, hundreds of companies closed due to the embargoes,” on accounts, he said, noting the fundamental challenge is a lack of economic growth. “It helps but it doesn’t even begin to solve the problem.”
