Argentina has one of the highest tax burdens in the region, according to OECD

The Organization for Economic Cooperation and Development (OECD) warned this Tuesday that the corporate tax burden of Argentina It’s found between “the highest in the region” and some business taxes are “highly distorting”in a report from the group made up of 38 countries.

In its annual report on structural reforms, the OECD also noted that the “productivity is low” in Argentina -US$ 46.9 GDP per employee versus 89.1 in the OECD- due to the lack of internal and external competition in many markets, and that high trade barriers deprive the economy of the benefits of international competition .

According to the data provided in the report, product market regulation is more restrictive in Argentina (with an index of 2.6) than in OECD countries (1.4). The organization then recommended that the South American country lower trade barriers to reduce the cost of intermediate inputs and capital goods.

In addition, he proposed reducing national regulatory barriers to entrepreneurship and market entry, including at the provincial and local government level.

And review the business tax scheme, especially provincial taxes that tax the turnover of companies and not income.

Best spend

On the public spending side, the OECD recommended changing the focus of social spending from energy subsidies to conditional monetary transfers and lowering social security contributions for low-income workers to strengthen the creation of formal employment.

The OECD also called for improving the efficiency of public spending on education by merging fragmented teacher training institutions and allocating more funds to early childhood and vocational education.

The OECD diagnosis is that poverty in Argentina is “persistently high and extreme poverty has been driven by rising inflation”, since he 40.1% of people were poor and 9.3% indigent in the first half of 2023, while the annual CPI last August was 124.4%, according to official data from Argentina.

He added that “one third of the workforce has informal employment”, while formal jobs are subject to rigid legislation and high non-wage labor costs.

The agency warned that social spending is biased toward largely regressive energy subsidies, despite the existence of effective cash transfers, programs that could be expanded.

Meanwhile, quality deficiencies in public education reduce equality of opportunity and hinder social mobility.

The OECD recommended “expand the unemployment insurance scheme” with individual accounts used in the construction sector to the entire economy and at the same time reduce severance pay costs.