Milei wants to transfer the VAT to the provinces and lower the federal tax to just 9%.

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, reduce 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.