Cecilia Goldemberg provides her view on the complexity of the Gross Income scheme, its effects on taxpayers and the role of advance collection schemes.
We reproduce below the complete article published by El Economista:
It is not new. On the contrary, it has been operating in the shadows for years. In many cases, it appears when least expected and attacks without mercy. Without exaggeration, sometimes its actions end up being a real massacre.
We are not talking about a serial killer or one who works for hire. We are referring to the regimes implemented by all the provinces to collect in advance the Gross Income Tax.
It is a tool that is as powerful as it is controversial. For the jurisdictions, it is simple (since they leave the collection task in the hands of a third party) and effective (since it generates a large amount of money that flows almost effortlessly into their tax coffers).
The proliferation of regimes reached everything, from credit and debit card payments, to banking transactions, to local commercial operations and even those involving other countries.
However, the abuse of these mechanisms resulted in a series of problems: chronic credit balances, difficulty to get out of the lists of taxpayers liable for withholding or errors by the agents are part of the scenario that have no solution in sight.
Thus, acronyms such as SIFERE, SIRCAR, SIRCREB, SIRTAC, SIRCUPA, SIRPEI or SIRCIP have crept into the dreams of companies and self-employed workers to turn them into nightmares from which it is difficult to wake up.
In this scenario, El Economista talked to several specialists to learn more about the origin of these mechanisms, the role of each actor and how to limit some of the excesses that exist today.
Origin of evil
To understand the problem, it is necessary to start with the most basic: the purpose of these mechanisms is to collect Gross Income, which is a tax levied by all the provinces and the Autonomous City of Buenos Aires.
Each jurisdiction is in charge of defining what will be covered by the tax, the rates to be applied and the taxable bases on which the amount to be paid must be calculated.
Likewise, they have the power to determine different ways for taxpayers to comply, such as withholding, collection and/or advance collection regimes.
Since Gross Income is paid throughout the country, some problems arose when operations crossed the borders of each province. Which one had to be paid in certain cases? The Multilateral Agreement arose as an attempt to respond to these problems.
Another actor appears here, in addition to the jurisdictions and taxpayers: the Arbitration Commission (COMARB), which is the body in charge of solving the problems that may arise when applying the aforementioned agreement.
In this way, it establishes criteria that seek to prevent and settle conflicts that arise when interpreting provincial regulations. They also collaborate with the collection regimes. But, as clarified by the specialists consulted, they have an organizational function.
In this regard, Alberto Mastandrea, partner of BDO Argentina, stated that “COMARB coordinates the application of a single system for taxpayers covered by the Multilateral Agreement, with the purpose of unifying criteria among jurisdictions”.
Meanwhile, Cecilia Goldemberg, partner of Andersen Argentina, assured that “the collection systems approved and managed by COMARB facilitate the declaration before the tax authorities of the amounts withheld or collected by the agents”.
This is so, since they file a single affidavit and automate the distribution of the payment among tax authorities, which is unique, always based on what is declared by the agent.
However, he explained that “this operational facility is not 100% generalized, because not all jurisdictions have adhered to all regimes”. In these cases, the taxpayer must file several returns for the non-adhered tax jurisdictions.
In short, as summarized by Mastandrea, “COMARB administers the system and consolidates registers and, in general, it is the member jurisdictions that set the criteria for inclusion, rates and exceptions”.
The dreaded padron
As explained by the experts, each of the jurisdictions is in charge of defining to whom Gross Income will be withheld, collected or collected in advance. What is not clear are the parameters that define who can be and who is excluded.
When asked by El Economista, Martín Caranta stated that “there is no homogeneous criterion when it comes to include someone in the lists of taxpayers liable for withholding tax”.
“In some cases, it responds more to a collection need than to a regulatory logic”, said the partner of Lisicki, Litvin & Abelovich. In other cases, the aim is to reach people who, according to the provinces’ criteria, should be taxpayers.
“Instead of carrying out inspections or actions to make them register and pay their taxes, the provinces included them in the lists to collect the debts in a faster way than following the procedures established by the Tax Codes”, he clarified.
Along the same lines, Mastandrea said that “the resolutions indicate general criteria, but the exact parameters are unknown” and added: “This makes the system quite opaque and is something that is generally criticized”.
And not only that. The partner of BDO Argentina remarked that “the jurisdictions do not do it either, nor do they publish in all cases the risk indicators that cause a worsening of the applicable rates”.
Application errors
If getting on a list can be a big headache -because it means that you will start to suffer from withholdings or early collections-, the situation can get worse when there are mistakes by the collection agents themselves (who are the ultimate actors in this play).
Goldemberg explained that “neither COMARB nor the tax authorities control the calculation errors that agents may make when making and reporting withholdings or perceptions”.
That is to say that each taxpayer -which is withheld- is in charge of verifying that there are no mistakes and of claiming in case there are any.
The problem, as explained by the partner of Andersen Argentina, is that “there is a web of provisions in each of the 24 jurisdictions that taxpayers should be aware of”.
“This includes identifying the applicable rates for withholding and/or collection in each province or in the City of Buenos Aires, since there is no uniformity and there is no single rate,” he added.
And he recalled that “in addition to this, in some jurisdictions a list is applied that is updated on a monthly basis, which identifies the taxpayers to be withheld or collected by taxpayer identification number (CUIT)”. Therefore, the possibility of an error is clearly very high.
Finally, Goldemberg indicated that “the administrative burden of compliance for the agents is exaggerated, very costly and high risk, this to replace the task of collection that corresponds to each tax administration”.
A heavy backpack
The consequence of the coexistence of multiple rules and actors, the lack of clarity in defining parameters for inclusion in the lists and the scarcity of tools to set limits is a constant flow of funds into state coffers.
According to Caranta, taxpayers advance the provincial tax authorities approximately 70% of the tax through these advance collection mechanisms (withholdings, perceptions and bank collections).
This generates, in many situations, balances in favor. “There are some provinces that owe taxpayers an average of 6 months, while in other cases it is up to 2 years of the collection,” he explained.
Mastandrea adds data. Although he acknowledged that there is no official information, “the evidence in a group of our clients shows that more than 85% suffer chronic credit balances and 90% of the monthly tax is paid in advance, even long before the taxable event is perfected”.
The Lisicki, Litvin & Abelovich partner also recalled that “the provinces have been creating mechanisms to request certificates of non-withholding or perception, but in many cases they establish requirements that are difficult to comply with in order to obtain them”.
“With the administrative route prevented, the only way left for taxpayers is to go to court to claim for the return of funds or exclusion from the rolls,” he said.
And he concluded: “In this context, taxpayers are put between a rock and a hard place, since they have no choice but to go to court to try to safeguard their rights as taxpayers, and pay the tax no more and no less than what the law says”.
An unexpected hero
In the midst of the problem, there is an actor that, according to some specialists, may be decisive: the Central Bank of Argentina (BCRA). At least, this is what Diego Fraga stated when consulted by this newspaper.
The Expansion Business partner explained that, from his point of view, the circulation of money through accounts in banks, fintechs and virtual wallets is a federal issue.
In this scenario, he considered that “if the provinces create regimes that end up acting as taxes without law and seriously threatening the formalization of the economy, it is necessary for the national government to intervene”.
In addition, he reminded that Law 21.526 (of Financial Entities) establishes that financial secrecy is not lifted for tax administrations except in very specific cases, such as when they have an inspection in progress or when there is a formal requirement.
“If a federal law prohibits them from accessing passive operations data, by what logic are they going to be allowed to intervene in taxpayers’ money movements?” he questioned.
For this reason, he believes that the Central Bank, which is the highest authority for the enforcement of financial entities, should “regulate, order and restrict all abuses by the provinces in this area”.
For further arguments, he recalled that in the tax amnesty implemented in the government of Mauricio Macri, it was the BCRA that prohibited withholding or collecting on the accounts opened for laundering.
From his point of view, “a regulation issued by the entity would be sufficient”, although he considers that, “in order to give greater legal weight to the measure, it would be convenient to implement it by means of a decree”.
One thing is clear: this needs to be resolved, since, as Mastandrea says, “early collection regimes operate as a compulsive advance that immobilizes working capital and impairs systemic competitiveness”.
If you have any questions about this topic, please do not hesitate to contact us:
Cecilia Goldemberg
Managing Partner
cecilia.goldemberg@ar.Andersen.com