Monday, July 15, 2024

ARGENTINA | 13-06-2024 19:43

'Ley de Bases' and fiscal package: Senate approves RIGI, privatisations, delegation of powers

Key articles, including most controversial, ended up being approved in the Senate. Capital whitewash and the moratorium for tax arrears passed unanimously but government unable to gain support for restoration of income tax or reform of levies on personal assets.

Following first reading for President Javier Milei’s ‘Ley de Bases’/omnibus bill, passed thanks to the tying vote of Vice-President Victoria Villarruel, the clause-by-clause debate of the second reading following general approval also favoured the government, despite objections raised by the moderate opposition to specific articles.

The first-reading scenario of a tied vote was repeated over key issues such as the declaration of emergency in certain areas and the delegation of parliamentary prerogatives to the Executive branch with the vice-president again breaking the deadlock with her affirmative vote.

Nevertheless, that came after Milei’s ruling party accepted multiple amendments, extending even to the controversial RIGI (Régimen de Incentivo para Grandes Inversiones) investment incentive scheme, which ended up swaying the balance in favour of approval of the bill.

The government knew in advance that the bill’s text would never go through as was, even after the anticipatory announcement of new amendments by Senator Bartolomé Abdala (La Libertad Avanza-San Luis) at the start of business.

He announced reductions in the list of state companies to be privatised and withdrawing the elimination of pension moratoria. 

In his bid to clinch a majority, Abdala even announced at the last minute amendments to RIGI, restricting its benefits to the following sectors: mining, energy, technology, agriculture, forestry and infrastructure. It did the trick, securing 36 votes with the support of Radical and PRO senators.

Abdala slashed the number of state companies to be privatised, taking Aerolíneas Argentinas, Radio y Televisión Argentina and the Post Office off the list. That only leaves the ENARSA state energy company and Intercargo to be privatised while the AySA waterworks, the railways and the highways are all up for leasing. 

NASA (Nucleoeléctrica Argentina Sociedad Anónima) and the Rio Turbio coal mine may incorporate prívate capital, always provided that the state retains a majority shareholding, while the final destiny of Banco Nación will depend on negotiations in the lower house.

Further changes announced by Abdala were a ban on dissolving state institutions linked to culture and the environment while exempting the CNEA (Comisión Nacional de Energía Atómica) from  government trusteeship. 

Nevertheless, the delegated prerogatives will permit President Javier Milei to downsize or deny funds to these cultural and environmental agencies, without the need to eliminate them. 

As previously agreed between new Cabinet Chief Guillermo Francos and provincial governors, all public works enjoying international financing or at an advanced stage (80 percent complete) will be renewed.

One hotly debated point on which the government ended up yielding was to withdraw the elimination of pension moratoria, thus maintaining the payment plans for employees lacking the statutory  30 years of pension contributions.

Bienes personales and Ganancias

After the ‘Ley de Bases’ debate, the Senate voted by majority to eliminate the chapters of Personal Assets and the restoration of income tax, both central points of the fiscal package.

But this setback can be reversed if the Chamber of Deputies can be prevailed upon to insist on its bill.

The Senate gave first reading to President Milei’s fiscal package by a 37-35 vote (UCR Senator Martín Lousteau made the difference here from the omnibus bill tie), thus approving the capital whitewash and the moratorium for tax arrears (both unanimously among other questions) but with less luck with restoring income tax or raising the floor for personal assets.

The whitewash permits undeclared assets of up to US$100,000 to enter the system without paying tax but is subject to progressive payments between five and 15 percent.

Raising the floor for personal assets was rejected by the same margin with which the fiscal package as a whole was approved – 37 votes to 35 – while the restoration of income tax was voted down 41 to 31 with four Patagonian senators, Lousteau, Maximilian Abad (UCR-Buenos Aires Province) and two moderate Peronists joining the 33 Unión por la Patria senators. 

The 22-percent exemption granted by the government to Patagonia provinces was not enough to dissuade the quartet from that region.

Milei’s government had proposed returning the income tax floor to 1.8 million pesos for single workers and 2.2 million for the married, a proposal specifically endorsed by Juntos por el Cambio governors. 

During last year’s campaign then Economy Minister and Peronist presidential candidate Sergio Massa had raised the income tax floor to two million pesos (then worth far more than today), implying a loss of three trillion pesos for national and provincial governments.


What next?

The Senate has approved the ‘omnibus’ bill with amendments so its text must return to the Chamber of Deputies for its review and a yes or no vote. If the deputies accept the amendments, the law stands approved and passes to the executive branch for promulgation.

What can the deputies do?

  • Accept the amendments. In that case, the law is sanctioned and passes to the President.

  • Insist on their own original bill, for which they would need an absolute majority.

  • Accept some amendments and reject others, an option also permitted according to one interpretation of the Constitution. In that case voting must be article by article, duplicating or topping the corresponding majority over each item in the Senate.

What can the President do?

  • Promulgate the law, thus bringing it into existence and completing the  legislative process.

  • Veto the law either totally or in part. If the latter, the part not vetoed may be promulgated.



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