Milei Shuts Down Argentina's Tax Agency

AFIP is an "unnecessary bureaucracy" that stifles economic freedom, says Milei's government. 

Argentine President Javier Milei announced plans to shut down the country's tax collection agency, a bold step in his ongoing effort to slash government spending and bureaucracy. 

On Monday, presidential spokesperson Manuel Adorni confirmed that the Administración Federal de Ingresos Públicos (AFIP), Argentina's tax bureau, will "cease to exist." It will be replaced by a newly formed agency, the Agencia de Recaudación y Control Aduanero (ARCA), which will assume some of its functions.

"Throughout its existence, this agency has functioned as a political cash box and, as we all know, many Argentines have been subjected to absolutely immoral persecutions," Adorni's statement reads. "No State bureaucrat should be delegated the power to tell an Argentinean what to do with his property."

The closure of AFIP is framed as "essential to dismantle the unnecessary bureaucracy that has hindered the economic and commercial freedom of Argentines." ARCA, the new agency, will embody a "simple, more efficient, less costly, and less bureaucratic" approach to tax collection and customs control.

ARCA "aims to reduce the State, eliminate unnecessary positions, professionalize the agency, dismantle corrupt networks, and improve the efficiency of revenue collection and customs control by removing privileges of the past and optimizing public management," the statement continues. 

According to Bloomberg Línea, 80 percent of AFIP's 2024 budget was allocated for salary payments. With the restructuring, a significant reduction in staff is anticipated, including the termination of over 3,000 AFIP agents who were "irregularly hired" by the previous administration. 

The changes will also slash "higher-level positions by 45 percent and lower-level positions by 30 percent," while also reducing senior officials' salaries. Overall, the measures are expected to "result in budgetary savings of around [6.4 million dollars] per year," the statement added. 

The overhaul is a cornerstone of Milei's broader strategy to curtail Argentina's fiscal deficit and shrink the size of its government, which he blames for fueling the country's crippling inflation. Since taking office in December, Milei has implemented a series of dramatic reforms, including cutting state subsidies, devaluing the currency, and closing several other state-run institutions.

In one of his early proposals, Milei introduced a 351-page bill containing 644 articles aimed at simplifying, digitalizing, and de-bureaucratizing government processes. The bill sought "to promote transparency and due administrative process…to obtain efficient regulations for market competitiveness, job creation, and everything that contributes to raising the standard of living of citizens."

Dissolving AFIP is one more step in that direction.