Ardua negotiations between the government and the provinces

National officials and 18 Economy Ministers of Opposition Provinces yesterday started a difficult negotiation without definitions, so the governors take the lead on an adjustment of 100,000 million pesos in 2019, a third of the total expected reduction.

During a meeting of one and a half hours in the House of Salta, national officials insisted that the provinces reduce their expenditures and ruled out that the Tax Consensus would be amended.

"Changing the tax consensus would be a very bad message for the world," Rodrigo Pena, secretary of the National Treasury, told journalists after leaving the building at Roque Sáenz Peña 933.

According to one of the proposals to be negotiated next week, according to the provinces, access to a 25,000 million peso credit signature of the Anses sustainability guarantee fund for public works is possible.

It was in turn excluded that the provincial states would give 5% of the co-participation in VAT they receive, so that this money will finance the Anses.

Pena arrived at the place accompanied by Alejandro Caldarelli, secretary of Provinces and Municipalities of the Ministry of the Interior, and Paulino Caballero, deputy minister of Relations with Provinces.

"We need to reach an agreement to have the budget and be able to meet the deficit target of 1.3% in 2019 and the balance in 2020. We have to go for the expenditure side, which in the last 70 years was the stone that we pushed in the direction of imbalances, "Caldarelli said.

The provincial ministers have suggested the possibility to suspend local taxes such as seals and gross income by a year, but Caldarelli clarified that "it would be a bad sign to cancel today something that was signed six months ago".

Although some provinces such as Tucumán and La Pampa were dissatisfied, there was general consensus that the elimination of the federal solidarity fund (FoFeSo) has not been reversed.

The government of Mauricio Macri wants the budget adjustment to be tackled by budget cuts, but the provinces have made a counter-proposal: expand the tax base, with a joint task between the Afip and the local tax administrations.

The provincial ministers have proposed that Afip adjusts the tax on personal assets because many taxpayers undervalue their statements; and also increase the impact of income tax on sectors that are not taxed today.

The latter is for example related to foreign trust companies that do not pay taxes in Argentina; It was also asked to improve the controls for imports that come from presumed "free zones".

Ministers also asked the government to comply with paragraph & # 39; P & # 39; of the fiscal consensus, which provided for the establishment of a federal body to determine the procedures and methodologies for the revaluation of real estate, in line with the market value.

Another proposal from the provinces is to reduce the transport subsidies to zero, which now reach 50,000 million pesos and of which 60% goes to the metropolitan area of ​​Buenos Aires.

Osvaldo Giordano, Minister of Economy of Cordoba, explained that this proposal is aimed at lowering subsidies to companies and diesel, without affecting what the state assigns to the Single Electronic Ticket System (Sube) and also to urban trains.

Giordano and his colleagues from Río Negro, Agustín Domingo and San Juan, Roberto Gattoni, agreed that it is not that far to reach an agreement to reach the figure of 100,000 million pesos, although the differences in the form.

As NA had foreseen, the envoys of the governors claim that they do not have much room to adjust government spending, especially in the provinces of the north of the country where the socio-economic indicators are the worst in Argentina.

Another important fact is that the Autonomous City of Buenos Aires is the only district in Argentina that manages to cover the salaries of the state employee factory with the income from its own collection.

The city uses 72% of its income to pay salaries while, on the other hand, Formosa should multiply its collection by seven (771%) to receive the salaries of the provincial employees at the end of the month.

A similar panorama is recorded in La Rioja, Jujuy, Catamarca and Chaco, provinces for which the federal tax cooperative and the extraordinary transfers of the nation are of fundamental importance for survival.

The meeting went to an intermediate room until next week, in which Pena, Caldarelli and Caballero will consult the ministers about the answers to the provinces.

Negotiations take place in the context of the announcement by Indec that the economic collapse in June fell by 6.7% in the form of a year, the sharpest decline since July 2009, and dropped by 0.6% in the first semester, especially affected through the sharp declines in agriculture, industry and trade

June registered the third consecutive month of low.

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