Milei will promote the new VAT and transform the tax relationship with the provinces.

In a bold move marking a new milestone in its ambitious agenda of structural reforms, the government of Javier Milei is preparing to essentially change one of the pillars of the Argentine tax system:the Value Added Tax (VAT). The proposal, which is part of a comprehensive tax reform project, aims to make revenue sharing more transparent, promote competition among provinces, and at the same time, ease the bureaucratic burden on taxpayers.

The core of the transformation consists of dividing the current VAT into two distinct segments. The Nation would retain a base rate of 9%, equivalent to 42% of the total collected—a percentage that corresponds to it according to the current primary revenue sharing—and the provinces would establish, with objective criteria, an additional rate according to their public spending structure. The Minister of Economy, Luis Caputo, confirmed that the project design is in its final stage and will be sent to Congress after the legislative elections.

"The provinces will set their own rate based on the income caused in each jurisdiction", explained Fernanda Laiún, founding partner of the firm Laiún, Fernández Sabella & Smudt. This decentralization of tax powers would mark a paradigm shift: it will require provinces to be more transparent and compete for investments by lowering their tax pressure.

The new scheme would not imply a break with the current revenue sharing regime. As financial advisor Federico Domínguez explained, "a law passed by a simple majority in both chambers would suffice to replace the current VAT with a non-shareable one with a fixed national rate, leaving provinces free to add a provincial rate". According to Domínguez, this mechanism would increase incentives for more efficient public spending management and was publicly supported by President Milei on his X account.

The project, in line with similar proposals recently implemented in Brazil, also takes as a reference a pilot experience carried out with small taxpayers in the province of Córdoba. The idea was promoted by Osvaldo Giordano, president of the Fundación Mediterránea and former head of ANSES during the current administration, who suggested the unification of VAT with other taxes such as Gross Income and municipal rates, to reduce administrative burden and simplify the system.

Additionally, the Casa Rosada has already taken concrete steps in the direction of this reform: it launched a unified tax portal that allows companies to operate with all jurisdictions in the country from a single platform, eliminating the tangle of perceptions and inconsistencies that traditionally complicated tax compliance.

From the Argentine Institute of Fiscal Analysis (IARAF), its director Nadin Argañaraz warned that this reform will open a deep political debate about the type of fiscal federalism the country needs. According to his estimates, replacing Gross Income with this new scheme would imply provincial rates between 9% and 11%. This, in turn, could lead to marked differences between provinces according to their level of spending and efficiency.

Meanwhile, the Government plans to eliminate distorting taxes such as the check tax (1.2% on bank transfers), with an estimated completion date by the end of the year. This measure, combined with the simplification of VAT, responds to a central goal of the Milei administration: to reduce the number of taxes in the fiscal system by up to 90%, without affecting revenue, prioritizing efficiency and competitiveness.

The technical team of the Ministry of Economy, with support from private sector specialists, continues defining the technical details. However, the political decision is firm: to move toward a modern, decentralized tax system consistent with the model of the country promoted by President Milei.