During the campaign trail for the 2023 presidential elections, Javier Milei identified tax reductions and inflation control as pivotal components of his electoral platform. On multiple occasions, he referred to taxes as a “robbery” that the state imposes on its citizens. For the majority, he has upheld that commitment. A recent survey by the Argentine Center for Fiscal Analysis estimated that Milei has cut the equivalent of 3% of GDP in tax revenue since taking office in December 2023. The three taxes that have experienced the most significant reductions are the PAÍS Tax, export taxes, and the personal property tax. While tax cuts have been the libertarian government’s primary tool for maintaining fiscal balance from the outset, the current situation presents a potential challenge. Given the insufficient growth of the economy, the government has increasingly reduced spending to uphold the surplus.
This leads to a significant deceleration in economic activity, resulting in a decrease in tax revenue, which necessitates additional cuts without effectively addressing the original predicament, a situation referred to as the “austerity trap.” The most significant decline in tax revenue since the libertarian administration assumed office was attributable to the expiration of the PAIS tax. This tax, which had been imposed temporarily and expired by law in December 2024, was levied on the purchase of foreign currency and various transactions involving the outflow of foreign currency. According to IARAF, its expiration represented 43% of the decline in tax revenue. Export taxes ranked second, experiencing a decline that accounted for 19% of the total. Although there were reductions in industrial and mining exports, the most significant effect was associated with agricultural products, particularly soybeans and their derivatives.
In third place were diminished collections from personal property tax, accounting for a total decline of 18% of the overall figure, alongside the value-added tax, which saw a reduction of 11%. However, there were also taxes that the Milei administration raised. The most significant was the fuel tax, with revenue increasing by 55%, which corresponds to 0.83% of GDP. Next in line is the income tax, which has increased by 36% since Milei took office. It is estimated that 800,000 individuals ceased payments following a reform implemented in September 2023, during the administration of Alberto Fernández. Milei, however, reinstated the tax upon assuming office. It is important to highlight that during the congressional vote on the income tax reform, the current president, who held the position of deputy at that time, cast a vote in favour of the tax cut.
According to the consulting firm Vectorial, July data indicate “an early sign of a deterioration in fiscal dynamics.” It was noted that during the two-month span from June to July 2026, a primary fiscal surplus of AR$2.26 trillion was recorded, equivalent to nearly US$1.5 billion at the official exchange rate. Concurrently, a secondary fiscal deficit of AR$780 million was observed, slightly exceeding US$516,000, marking the most unfavourable figures for that timeframe since Milei assumed office. “For now, these are limited signs, but if they were to intensify, they could begin to strain one of the main pillars underpinning the economic program,” the report added.
