Argentine budget deficit triples as trickle-down tax cuts and recession far outweigh subsidy cuts.
The Argentine Finance Ministry reported that the nation's fiscal accounts recorded a total deficit of 57.6 billion pesos ($4.1 billion) - nearly three times as much as the 20 billion-peso deficit ($2.2 billion, at the time) recorded the same month last year.
The sharply higher deficit was mostly a result of lower revenues, which fell by 6.7% in June over the same time last year to 129 billion pesos ($9.1 billion). The decline in revenues is far more severe in real terms, however, because inflation in Argentina has doubled to 47% since the Mauricio Macri administration took office. Taking inflation into account, real revenues collapsed by over 36% - the steepest in modern Argentine history.
Deficits for the first six months of the year were up a more modest 24.4% to 133.2 billion pesos ($9.3 billion) - a figure described as an improvement by Finance Ministry officials because in real terms this represented an 8.1% decrease. The trend toward deteriorating public finances was underscored, however, by the fact that June accounted for nearly half (43%) of the entire budget deficit for the first half of 2016.
Argentina's federal revenue base also showed a marked shift away from income, corporate, and trade taxes (which are mostly paid by the wealthy). Former Economy Minister Roberto Lavagna, a centrist opposed to both Macri and his populist predecessor Cristina Fernández de Kirchner, estimated that the sharp export tax cuts decreed by Macri in December will cost federal coffers at least 46 billion pesos ($3 billion) this year alone.
The tax burden is meanwhile being shifted to average Argentines both directly and indirectly. The types of tax most often encountered by the majority of households - social security contributions and value-added sales taxes - actually rose by 35% and 40%, respectively. These two revenue streams (the most regressive) now account for over 70% of federal revenues.
Cutbacks of around 160 billion pesos ($10.5 billion) in utility and transport subsidies for FY2016, in turn, have led to fare increases of 100%, water and electric rate hikes of 300%, and gas bill hikes of close to 1,000% - a back-door tax increase estimated at close to $800 a year or nearly 6% the median full-time salary in Argentina.
Falling revenues therefore did not translate into lower taxes for most of Argentina's 43 million people - whose median earnings have fallen by at least 11% since Macri took office just eight months ago. A separate report by the CAME medium business bureau revealed that June retail sales fell 9.8% in real terms over the same time last year.
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