During the campaign trial for the 2023 presidential elections, Javier Milei made cutting taxes, together with lowering inflation, one of his key electoral promises. On more than one occasion, he even called taxes a “robbery” the state inflicts on its citizens.
For the most part, he has kept that promise.
A recent survey by research center Argentine Center for Fiscal Analysis (in Spanish, IARAF) estimated that Milei has cut the equivalent of 3% of GDP in tax revenue since taking office in December 2023.
The three taxes that have been cut the most are the so-called PAÍS Tax, export taxes, and the personal property tax.
While tax cuts have been the libertarian government’s primary tool for maintaining fiscal balance from day one, the current situation poses a potential problem.
Since the economy is not growing enough, the government has been cutting spending more and more to maintain the surplus.
This causes the economy to slow down so much that tax revenue declines, forcing further cuts without actually improving the initial situation, a scenario known as the “austerity trap.”
A rundown of cut taxes
The most significant drop in tax revenue since the libertarian administration took office was the result of the expiration of the PAIS tax. This tax, which had been imposed temporarily and expired by law in December 2024, was levied on the purchase of foreign currency and various transactions involving the outflow of foreign currency.
According to IARAF, its expiration accounted for 43% of the loss in tax revenue.
In second place were export taxes, with a decline equivalent to 19% of the total. While there were declines in industrial and mining exports, the greatest impact was connected to agriculture products, primarily soybeans and their derivatives.
In third place were lower collections from personal property tax (total decline of 18% of the total) and the value-added tax (VAT) (11%).
However, there were also taxes that the Milei administration increased. The most significant was the fuel tax, whose revenue rose by 55%, equivalent to 0.83% of GDP.
Next in line is the income tax, which has increased by 36% since Milei took office. It is estimated that 800,000 people had stopped paying it following a reform carried out in September 2023, during the Alberto Fernández administration.
Milei, however, reinstated the tax once he took office. It should be noted that when the income tax reform was voted on in Congress, the current president, who was then a deputy, voted in favor of cutting it.
Problems on the horizon?
According to the consulting firm Vectorial, July data show “an early sign of a deterioration in fiscal dynamics.”
They explained that in the two-month period from June to July 2026, there was a primary fiscal surplus of AR$2.26 trillion (almost US$1.5 billion at the official exchange rate) and a secondary fiscal deficit of AR$780 million (a little over US$516,000), the worst figures for that period of the year since Milei took office.
“For now, these are limited signs, but if they were to intensify, they could begin to strain one of the main pillars underpinning the economic program,” the report added.
