Earnings: specialists question the official criteria and say that the new salary floor should rise this month to $312,000

The changes in Earnings that the government evaluates could be left halfway. Sergio Massa requested on Friday to bring the salary floor for which workers pay the tax to $265,000 gross and the Ministry of Economy confirmed on Sunday that the increase will be anticipated in May or June without specifying the new value, but specialists believe that the request is insufficient.

For taxpayers, the new amount of remuneration that begins to suffer discounts should rise in March to $281,000 and in May to $312,000 from the current level of $225,937 gross. These are increases of 23% and 38%, with a different criterion from the one used last year and the one that is being evaluated now to update the floor.

The alternative calculation arises from adjusting the current value by the average remuneration index of registered workers (RIPTE), a mechanism that is used once a year -from October to October- to update the non-taxable minimum, special deductions, family, exempt Christmas bonus and remuneration with increased deductions (the salary “floor”).

“If you take the latest data from March 2022 and compare it to October of last year, it gives you a 24% rise in the RIPTE, so the anticipated increase should be almost $281,000. And if you project the change in the index from October, the new floor should be $310,000,” said Alberto Mastandrea, a partner at BDO.

The new increase promoted by Massa is not calculated on the RIPTE but on the real number of workers who would have withholdings on their assets if there were no changes in Earnings. According to official data, that number went from 740,000 in February to 850,000 in April, 110,000 more people (15%) in just two months. And it would reach 1.3 million in 2022.

This year’s increase due to the RIPTE variation (between October 2020 and October 2021) determined an adjustment of 50.5%, which brought the current salary floor to $225,937 in January. Now, if the amount of withholding, the parity, and the wage bill is projected, the anticipated rise should be an additional 17%, as follows from the Massa initiative.

In 2021, there have already been changes. Due to the reopening of joint ventures, Congress approved in April of that year and increase in special deductions for remunerations of up to $150,000 gross so that they give zero profits, and authorized the Executive to raise them by decree. Then, after the electoral defeat in September, the President increased that amount to $175,000.

Now, the Executive is empowered to anticipate the increase scheduled for January 2023 due to the changes in December to the Personal Assets Law, which allows increasing the special deductions for employees in a dependency relationship and the exemption from the Christmas bonus.

“It is always taken from October to October and updated in January, this year’s adjustment has already been made and you are always three months behind. Originally, the idea was a good one, but never with 60% inflation, but rather the parities return to put many more workers than expected on Profit’s radar because the salary is going faster than the tax,” Mastandrea said.

The spirit that led in 2021 to increase the salary “floor” for which the tax is paid was that it reaches only 10% of workers and a small sector of retirees, those with higher incomes. Thus, the universe reached was reduced from 2.3 million in 2020 to 950,000 in 2021. However, due to the advancement of parity, the scheme began to become outdated.

For Sebastián Domínguez, the law should be reformed so that the adjustment of Earnings is semi-annual, automatic and by the inflation accumulated in the year, so that it does not depend on discretionary decisions of the Executive. According to his calculations, considering inflation in May of 5/6%, the anticipated increase in 2023 should be greater than the one evaluated.

“If one adjusts the special deduction for the accumulated CPI variation, which is 23.1% as of April 30, the amount should be $278,000, but that is April. If you take until May, the increase should be close to 40 % and the amount of $312,000, so that the increase in remuneration that does not pay Earnings follows inflation,” said the tax specialist from SDC Tax Advisors.

Domínguez also marked the limitations of the changes by decree. “The non-taxable minimum cannot be touched by decree, the only thing the Executive Power can do is touch the increased deductions, which has no effect for the self-employed and neither for the independent under the monotax regime, since the boards,” he said.

For this reason, the scales will remain unchanged, since what is modified is a special deduction on remuneration so that they give zero profit, in this case, those of up to $225,937, which could be taken to $265,000.

This will benefit dependent employees with salaries up to that value and those who earn a little more, to whom other deductions will be applied.