As Argentina’s incoming legislators prepare for their December 10th swearing-in, a segment of teh Peronist movement is circulating a detailed tax reform proposal aimed at challenging the economic agenda of President Javier Milei. The plan, drafted by Congressman-elect guillermo Michel, seeks to offer an alternative path forward amid ongoing economic challenges and recent electoral losses for the Justicialist Party. while acknowledging the current administration’s success in maintaining a fiscal surplus, the proposal focuses on providing targeted relief to small and medium-sized enterprises-a key sector for Argentina’s economic recovery-through a new “SIMPLE” tax regime.
A segment of Argentina’s Peronist movement is developing a comprehensive tax reform proposal, circulated among incoming legislators ahead of their December 10th swearing-in. The effort aims to revitalize the political standing of the Justicialist Party (PJ) following recent electoral setbacks.
The document, intended as a draft bill, seeks to present an alternative to both the current government’s economic plan and established policies within the Kirchnerist wing of Peronism, which proponents say lacks a strong technical basis. Attempts to rally economic support, such as a recent gathering of economists, have so far failed to gain traction.
The proposed reforms seek to provide relief to small and medium-sized enterprises (PyMEs) while acknowledging the success of the current administration in avoiding a fiscal deficit – a key argument made by President Javier Milei. The plan’s development comes as Argentina continues to navigate a challenging economic landscape, recently bolstered by assistance from the United States, including support from Donald Trump.
The proposal outlines initial steps to ease the burden on PyMEs through tax relief and administrative simplification, based on an analysis of consumption and income. According to the text, drafted by Congressman-elect Guillermo Michel, the plan also includes a review of labor costs, linked to broader labor market reforms currently championed by the government and supported by business leaders, and increasingly accepted by labor unions.
New SIMPLE Regime
A central component of the initiative is a new regime called “SIMPLE,” designed as a transition between the existing simplified tax system (Monotributo) and the standard tax framework. The goal is to formalize approximately 680,000 microenterprises employing 1.3 million people, without jeopardizing the government’s fiscal surplus. Proponents aim to maintain a surplus of +1 percentage point for 2026 to avoid impacting revenue sharing with the provinces, a move intended to garner support from governors.
The first phase would focus on reducing the complexity of tax filings for PyMEs and increasing the progressivity of the tax system. Currently, transitioning to the general regime involves a significant increase in administrative burdens, including the filing of VAT and income tax returns.
The proposal offers several benefits, including the elimination of VAT and income tax returns, with taxation based solely on revenue and categorized by business type. It would also encompass companies and individuals with limited tax obligations, potentially formalizing freelancers and service exporters who currently work abroad. These entities would be exempt from withholding taxes to preserve their working capital.
The tax would be a percentage of revenue, automatically calculated by ARCA, requiring minimal administrative effort. It would consolidate VAT, income tax, personal property tax, and autonomous tax obligations. Proposed rates would vary by industry, ranging from 7.5% to 15%.
The plan also includes extending tax relief through a simplified VAT and export tax refund system, designed to improve working capital for exporters. Perhaps most notably, it suggests expanding the RIGI program – currently used to incentivize large companies with investment benefits – to include PyMEs, encouraging them to reinvest profits. Small and medium-sized businesses could also benefit from a reduction in the personal property tax rate from 0.5% to 0.375% for the next two years, a benefit currently scheduled to expire at the end of 2025.
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Offsetting Revenue to Maintain Surplus
A key challenge for opposition proposals has been addressing President Milei’s argument regarding the funding of reforms without impacting the exhibited economic surplus. The draft bill proposes that any potential revenue loss would be offset by the benefits of simplification, particularly in reducing the high rate of informality among microenterprises.
Formalizing these businesses would address current issues, including an estimated 35% rate of unreported sales, the practice of generating fraudulent tax credits, and a general lack of compliance. Analysis suggests that companies with annual revenues between $100,000 and $1 million currently pay a meager 2.1% of their sales in taxes.
The program proposes a tiered personal property tax for large companies, gradually increasing the rate from 0.375% to 0.625%, which would result in an additional 0.04 percentage point to GDP. Similarly, a progressive scale for dividends and stock sales would offset an additional 0.03 percentage point of GDP. Currently, large companies pay a flat rate of 7%. The proposed scale ranges from 5% to 10%, depending on the magnitude of the transaction. The scenario is similar for capital income, with a tiered scale ranging from 10% to 20% instead of the current flat rate of 15%.
The debate over the project will gain momentum depending on the level of political support it receives, but it could become a viable alternative to the government’s single-step approach. It may also assist the opposition, which has lacked technically sound plans to challenge the government’s agenda, particularly as Congress prepares to address three major reforms in the coming year. The success of these reforms is crucial for the government to demonstrate results to the United States, which has effectively certified Argentina’s governance in exchange for financial assistance.
