A lot of businesses were speculating by front-running inflation to drive up margins. Customers were generally lost on what relative pricing was and were so busy trying to buy everything before their salary devalued that they weren't aware. Now that prices are relatively stable and margins tighter, you can see those stores who realistically never had the volume to stay in business.
Honestly, the vast majority of stores that I've seen in Neuquen, both before and after Milei are for the most part chronically empty of customers. At first I wondered if they were laundering fronts for negro money but the most likely answer is that when you aren't financing the inventory, own the building and staff it with family, you can go for quite a while on very low sales with such high margins.
Most of the time I check Mercado Libre for a product I see in store, it's usually half the price. So we're talking a 100% mark-up for the store front/employees, in addition to the cost-of-goods profit margin.
I agree. I think because credit isn't available here and everything is paid for in cash, the business owners think they need to earn a massive return on it. The inflated rate of return is far above what businesses in other countries would target typically.
I agree that Mercado Libre brings in competition, though not necessarily half the price. That might be a function of location being in the south. So I don't know what the final impact shipping might have.
All well and good to use tariffs to help local businesses compete against global markets. Nestor Kirchner did this and Argentina was able to recover somewhat during his first term; it ultimately was the right strategy, even though he ended up being a thief and ultra corrupt. However, the issue is that the taxes are stifling and the government makes running a business near impossible. The way forward for Argentina is to make things much more business friendly, but also protect local industries with tariffs. I think the whole full free trade thing is a scam. Argentina is a perfect case study, and now Nepal recently, of what full free trade does to a country by hollowing out its industry. On the other hand, Argentina needs to get rid of about 90% of its taxes and curb the power of trade unions by not permitting them to constantly shut companies down. Being able to actually export industrial products would be nice for a change, but with the crappy business laws, regulations, and red tape it is it basically takes a miracle to have a successful business, much less export.
How is Free Trade a wholesale scam? You largely seeing how trying to cancel agreements and effective free trade is working out for the US. No businesses are relocating, protected industries are just charging more (steel), and its costing Americans around $500B or more annually in taxes.
It is also making American made goods less competitive on the global scale since they have tariffs on their inputs compared to similar products made in other countries. You can also much discussion about the proposed elimination of de minimus in Europe and charging a minimum tax per shipment when buying from AliExpress, Shein etc. Again, it just prevents the buyers from buying directly and protecting businesses that literally buy the same product then mark it up multiple times.
And the tax structure in Argentina is not horrible on corporate income tax etc. The biggest issue is the provincial and transfer related federal taxes that are charged on Gross Amounts. This should be included in the reform, but as it includes the large bulk of provincial revenues, it is going to be a severe overhaul as they need to make that up from somewhere else, I have suggested property/land value taxes and a portion of income tax. They can then enforce taxation and by increasing the tax base through elimination of the black market (for sure with but potentially without lowering nominal tax rates) this combination should cover the tax base.
When exporting you can issue Factura E that does not include IVA. Much of the red tape, delays and issues with importing and exporting was eliminated with this government.
It's a vicious circle of tax evasion that has ARCA constantly trying to figure out how to tax the front-end of the production cycle because it knows you're going to lie about the back-end numbers.
Take for example the whole black market employee situation. This is probably one of the easiest forms of tax evasion to spot. I mean how hard is it for an inspector to walk into a store, count the employees attending and compare it to payroll tax rolls??? Yet, we're told that's why the Jubilacion minima is so low and why they have to tax your Billete Virtual on gross receipts.
Agree they need to eliminate the whole black market system. I think this might be coming in the future once they put through the labour and tax reform. Again the gross receipts is the provincial revenue, not federal, but that is the tax that is quite imposing because it is on gross amounts. As stated above, that needs to be eliminated. The transfer in/out tax of business accounts should also be eliminated.
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