Milei destroys the revenue-sharing system: the necessary reform to save the country

At Expoagro 2025, President Javier Milei made his stance clear on one of the most controversial and debated topics in Argentine politics:the federal tax revenue sharing.

In his speech, he stated that the current model of resource distribution between the Nation and the provinces is exhausted, and that a profound reform is urgent if the development of all regions of the country is to be guaranteed. With a focus on fiscal efficiency, competition between provinces, and greater autonomy for economic decision-making,

Milei is not only consistent with his proposal for a more de-bureaucratized and federal Argentina, but he also relies on a system that has proven to be ineffective and unfair for many jurisdictions.

Why is what Milei said true?

Milei merely brings to the table a reality that many politicians have evaded for decades: the current federal revenue sharing system promotes inequality between provinces.

While some, like the Autonomous City of Buenos Aires (CABA), Buenos Aires, and Córdoba, receive more resources due to their greater revenue-generating capacity and population, other smaller provinces with less dynamic economies are relegated to a smaller share of national funds.

This is not just a perception, but it is grounded in the legal framework that governs the distribution of resources, which has not been substantially modified since Law 23,548 of 1988.

Law 23,548 and historical inequity

The Federal Tax Revenue Sharing Law (Law 23,548), enacted in 1988, established the distribution of tax revenue resources between the Nation and the provinces. Although it has been modified on some occasions, the basis of its structure has not changed significantly.

This law establishes that 34% of the resources caused by national revenue collection are allocated to the Nation, while the remaining 60% goes to the provinces, and an additional percentage is assigned to the Autonomous City of Buenos Aires.

At first glance, this distribution may seem equitable, but the reality is that it doesn't take into account the structural inequalities between the provinces. Buenos Aires, for example, receives a much larger portion due to its productive and population capacity, leaving smaller provinces with fewer resources.

The most favored and most affected provinces

It is true that the current system mainly benefits provinces with greater economic power, while smaller ones with more fragile economies, such as La Pampa, La Rioja, or Formosa, see their share in the total revenue sharing reduced.

In fact, resources are not always distributed based on the social and economic needs of each province, but rather on political agreements and negotiations that often do not benefit the most disadvantaged areas.

This model fosters a dependence on the Nation that doesn't favor the development of true provincial autonomy or balanced growth of the country.

The fiscal competition model proposed by Milei

Milei's proposal is clear: move toward a model of fiscal competition between the provinces. Instead of relying on a centralized distribution system, provinces should have the ability to establish their own taxes and manage their resources more autonomously.

This model is not new. In fact, countries like Switzerland or the United States have adopted fiscal federalism systems that allow states or cantons to compete with each other to attract investments and promote efficiency in public administration.

In this sense, the president proposes a transition to a system where each province, based on its capabilities and needs, can collect local taxes and receive incentives through reforms that reward efficiency in public spending and the reduction of tax pressure.

This means that provinces with good resource management will be able to retain higher revenues, while those that fail to generate economic development will need to seek alternative solutions, such as improving their fiscal policies and reducing unnecessary public spending.

More autonomy and less dependence on centralism

The current revenue sharing model has reinforced a structure of centralist dependence, where provinces are constantly forced to ask the Nation for help to finance their projects and needs.

This fiscal centralism has not only created an overload on national finances, but it has also hindered provincial autonomy and regional development.

While solidarity between provinces is a valid principle in a federal system, a model that discriminates against provinces with fewer resources and creates a vicious cycle of inequality can't continue to be perpetuated.

Reforms to guarantee real federalism

President Milei has proposed a series of key reforms to make the revenue sharing system not only fairer but also more efficient. First, a legal reform is needed to modify Law 23,548, eliminating discretion in the distribution of resources.

Second, an incentive system should be implemented for provinces that manage to reduce their fiscal deficits and promote greater economic development. Third, the reform must be gradual so that provinces have time to adapt to this new system of fiscal competition.

What Milei said at Expoagro 2025 is not just a critique of the revenue sharing system, but a wake-up call for Argentina to become a country where competition and fiscal autonomy are the pillars of federal development. This reform is not only possible but essential to guarantee a prosperous and truly federal future for all Argentines.