Earnings: who pays today, how the tax is updated and what the Executive Power can modify

Since 2018 and due to the validity of a law approved at the end of 2016, the variables that define who pays the income tax and, in any case, with what rates, they are updated at the beginning of each year according to the interannual variation, as of October, of the Average Taxable Remuneration of Stable Workers (Ripte). However, the lowest salary achieved by the tax burden could be increased by the Executive Branch at any time, because a law approved at the end of 2021 expressly granted him that power.

The Ripte is an indicator that measures how the salaries of workers declared by their employers are doing for at least 13 consecutive months in the pension system. That is to say, it is a reference of the income of formal workers and with a certain level of stability in their jobs. In the first three months of this year, the variable advanced 18.1%.

In a context of inflation and wage recompositions, not applying updates –something that happened during long periods in the Kirchnerist governments, causes that there are people who begin to pay taxes -or that the weight of the tax already paid grows, depending on the case-, even if their income has a lower purchasing power than it had when they were not covered by the tax burden.

At the beginning of this year, to determine the non-taxable minimum call that is in force today, an increase of 50.6245% was applied to the figure of $150,000; Hence, today Earnings are discounted to those who have a gross salary greater than $225,937. The latter is the number that the president of the Chamber of Deputies, Sergio Massa, asked to now raise to $265,000, in a letter sent to the Minister of Economy, Martín Guzmán, in the midst of the climate of the strong internal fight in the ruling party, whose protagonists are President Alberto Fernández and Vice President Cristina Kirchner.

To find out if it is appropriate to withhold any amount for the tax, companies look the remuneration of each month in particular, and also, the monthly average of the period of the year that has elapsed.

Why was the $150,000 figure used for this year’s update? That was the lowest salary achieved by the tribute during a period of 2021, based on a rule established by law that same year to define that particular variable. Last September, that amount had been raised to $175,000 but, when the time came to finalize the annual readjustment by Ripte, the Government ofdecided to apply the salary variation percentage on the first of these two non-taxable minimums (the one for $150,000, which was valid until August).

Before the validity of the law that provides for the automatic updating of the tax bases and that was approved during the macrista administration, the rule used was discretion. Thus, there were periods during the Kirchner administrations in which, despite inflation, the parameters of the tribute were frozen. That produced that many more workers were being reached and, in addition, that those who already had to pay taxes were affected by higher rates, even when their purchasing power was dwindling.

That same effect continued to occur and is occurring with special force now, each time that, due to recompositions that are not enough or barely enough to compensate for inflation, the salary reaches a level at which it is reached by Earnings, or is affected by a highest rate to which it was previously subject.

Between the measures that were arranged during the government of Cristina Kirchner, and particularly while Axel Kicillof was in charge of the Ministry of Economy, there were some that caused a very strong distortion of the tax scheme. As a consequence of those provisions, there were employees who had Profits deducted having lower salaries than those of others who, on the other hand, were exempt from the tax burden.

One of the latest developments was the approval, at the end of 2021, of a law that included a clause that grants the Executive Power, for the current 2022, the power to increase the amount of the lowest salary reached by Earnings. This attribution was granted without conditions regarding the criteria to be adopted or in relation to the time of year.

As for the freelancers, although they are covered by the updating of each year according to the evolution of the Ripte, they were not contemplated by the provisions of the law that last year improved the situation for employees and retirees. At the beginning of 2021, while the changes were being debated in Congress, Massa affirmed that he was working “in a parallel law” for that group of taxpayers. But, until now, there was no project on the subject. For all this year, the general deduction for the self-employed is $757,694 (a monthly average of $63,141). From that billing amount, taxes are paid and, from the taxable base, the concepts that can be deducted are deducted (some deductions are maintained with amounts frozen for many years).

And for retirement and pensions, a special legal provision defines that the non-taxable minimum -although not for all- is equal to eight times the minimum amount. From June, that figure will be $300,200. This is only valid if the conditions established by law are met: no income must be received from other sources, in addition to the pension (or, if they do have it, they must be low income, not exceeding $252,565 in all of 2022) and it must not be reached, depending on the patrimony, by the tax on Personal Assets. If these requirements are not met, pension assets are subject to Earnings under the same conditions as wages.

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