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Floor flaws but also high-flying

49 0 2
30.12.2016

In giving birth to this weekly round-up column half a century ago (appearing every Sunday until switching to Friday eight weeks ago), Andrew Graham-Yooll gave it the slug “Politics & Labour — that slug would now seem to stand more vindicated than ever after Monday’s meeting between the government and the CGT labour umbrella helm over the income tax floor pretty much defined the rest of the week’s events. Parliament is supposed to reign supreme in fiscal policy according to “No taxation without representation” principles but there was a curious role reversal here — those paying the tax in the form of the most unionised and highest-paid workers said how much they wanted to give and within three days Congress had rubberstamped the deal by a 56-2 vote in the Senate (following endorsement by the mostly Peronist provincial governors) and approval by a 166-5 margin in the Lower House.

The CGT was not especially subtle about spelling out this clout. One of its core strategic maxims is: “Hit first and then negotiate” but Monday’s savage transport strike (the last straw for departing Aerolíneas Argentinas chief Isela Costantini?) was simultaneous with the tax haggling. Picket and protest activities disrupting traffic throughout the rest of the week seemed equally gratuitous.

Despite the income tax issue being wholly politicised, labour was thus the big winner and politics the loser (the editorial on page 22 elaborates further on how in the individual cases of the main political forces). Tactical blunders abounded — first the government gratuitously called extraordinary sessions to present a minimalist bill to a hostile Congress without any of this week’s frantic negotiations beforehand, then Renewal Front leader Sergio Massa took full advantage to inflict an embarrassing Lower House defeat on the Mauricio Macri presidency via an opportunistic bill which had no chance of being acceptable to the provincial governors dominating the Senate (since half of any tax relief was at their expense). But beyond the various miscalculations the politicians were missing the point when they allowed the petty manoeuvres over the floor to distract them from the big picture of the tax system as a whole.

If Macri’s Argentina is aspiring to join the OECD (the Organisation for Economic Co-operation and Development), it should bear in mind that OECD states are overwhelmingly funded by direct taxation whose cornerstone is income tax. This is (or should be) progressive whereas the indirect taxation dominating the Argentine system punishes the richest and poorest alike with (for example) the 21 percent IVA value-added tax failing to discriminate between consumers. It is often (and rightly) said that the inflation tax hits the poorest the hardest but the more official forms of taxation are not much better in that respect.

Yet in light of the growing business complaints about the tax burden preventing them from being competitive (their response to government calls to improve productivity), it should be said that the current system unduly penalises production when income would be a better focus in terms of economic efficiency as well as social justice. Export duties on farming produce are paradigmatic here — not only do they bleed small farmers as much as big but they target positive contributions to the nation’s trade balance instead of the rural incomes which can afford to pay the most.

THOSE OFFSHORE ISLANDS

Putting income tax relief into the Christmas stockings of over half a million Argentines (at least until their next wage hike) took absolute priority for the political community at least but there were other news items of interest as the country began winding down for the holiday season. Here pride of place could be given to the resumption of mainland flight connections with the Malvinas Islands as from next October (especially given the language of this newspaper). Not that it happened locally or was given a high profile — the agreement was signed in London at deputy foreign minister level (Sir Alan Duncan and Pedro Villagra Delgado, who replaced Carlos Foradori five weeks ago).

Perhaps some nationalist soul here might feel that Villagra Delgado should have paraphrased Macbeth (we are now entering the last days of the fourth centenary of William Shakespeare’s death) to say: “Hear it not, Duncan; for it is a knell, That summons thee to heaven, and me to hell,” since all the advantages were seen as going Britain’s way — the meeting was attended, among others, by Falklands Legislative Assembly members Mike Summers and Phyllis Rendell (who was the islands’ oil director........

© Buenos Aires Herald