In come politics, out goes sense

Christmas cannot come soon enough for many people, especially among the very young, but President Mauricio Macri is probably looking more forward to some other days in the remains of this year — such as the respective closures of the legislative and judicial branches after the self-inflicted muddle over the income tax floor and the increasingly international legal tangle over the Jujuy social indigenous leader Milagro Sala (not to mention his predecessor Cristina Fernández de Kirchner’s quest for judicial martyrdom moving a bit closer to being indulged). If Benjamin Franklin said that there were only two things certain in life: death and taxes, Macri would probably modify his current definition of inevitability to taxes and miracles — with the latter referring, of course, to Milagro Sala rather than any such miracles as the “second half” suddenly exploding into prosperity in its last fortnight.

The parliamentary debate over the income tax floor has become more politicised by the day — everything to do with one-upmanship with almost no interest in defining a fiscally viable and socially just income tax floor, never mind the more general modernisation which the tax system needs so badly. Both sides keep painting themselves into corners on purely political grounds, leading to various tactical twists and turns.

The original sin here was Macri’s incomprehensibly rash decision to submit a bill updating the income tax floor by less than his own 2017 inflation forecast to extraordinary sessions in a hostile Congress, instead of just allowing the normal parliamentary year to end in November —no doubt betting on Peronist fragmentation and provincial fiscal needs to sway the balance. But the temptation to defeat the government was too strong for the Peronists, whose three main strands overcame their rivalries to push the irresponsibly generous tax bill of Sergio Massa’s Renewal Front through the Lower House.

But then it was the turn of the opposition to miscalculate. In an outburst of political greed most inland Peronist governors thought they could have their cake and eat it too — confirm Macri’s defeat by whipping through Massa’s bill while at the same time remaining safe from any adverse fiscal impact (three billion pesos or so for most provinces, nearly 10 billion for Buenos Aires province) due to the certainty of Macri’s veto. Yet if Macri’s gamble on Peronist division had badly misfired, he still had provincial revenue needs in reserve — the governors were informed early in the week that there would be no veto (purely a political gambit with zero fiscal responsibility).

Since swift passage of Massa’s bill was no longer risk-free, too many Victory Front senators had second thoughts for further progress to be possible. Playing for time permitted various options, of which amending Massa’s bill and thus automatically sending it back to the Lower House was probably the most obvious. Quite apart from the hole dug into federal revenue-sharing, all three compensatory taxes proposed by Massa (levies on financial profits and gaming, as well as the return of export duties on mining) had their critics — thus senators from mining provinces were obviously unhappy with the export duties while others thought that slapping a tax on fixed-term deposits facing falling interest rates might do more to discourage saving than punish speculation. But instead of amending the bill, the senators decided to propose “dialogue” with other sectors (starting with the governors and trade unions) — a call speedily echoed by the government.

The tax debate could indeed be usefully broadened to attempt the modernisation of a tax system which is both quantitatively and qualitatively at fault (both too heavy and too many socially unfair indirect levies) but “dialogue” quickly turned into a tactical stopgap as both sides started to smell blood and fancy their chances of a quick win. Encouraged by the successful obstruction in the Senate, Macri felt sufficient fiscal empathy from the governors to revive hopes that Finance Minister Alfonso Prat-Gay’s original bill might have the success in the Upper House it had been so crushingly denied in the Lower — strict limits were thus set on “dialogue” (meeting the sectors in isolation and on the government’s terms with minimal concessions envisaged) with a view to defining income taxation next Wednesday. Irked by this scant interest in negotiations and pressured by his ultra-Kirchnerite colleagues, Senate Majority Leader Miguel Angel Pichetto (Victory Front-Río Negro) picked up the gauntlet and made Wednesday his D-day too — following the initial surprise over the veto waiver, the Senate now seems inclined to call the government’s bluff and see if Macri can afford the luxury of widening a fiscal deficit already heading towards six percent of gross domestic product merely in order to score political points. Do not rule out a lot more such jockeying between now and next Friday’s column but by then (with the 12 days of Christmas about to commence) this issue really should be decided.


The court recess in January would also be very timely for Macri now that the beginning of Milagro Sala’s first trial is giving her so much more publicity than her secluded prison cell — almost a year after her arrest the indigenous firebrand is further from going away than ever. A Macri intent on rejoining the world is increasingly finding that sorting out the irregularities of this arrest is part of the entrance fee and he is starting to doubt whether loyalty to his provincial ally Jujuy Radical Governor Gerardo Morales justifies the international cost. The pressures are now not only coming from an occasional visitor like Canada’s Justin Trudeau or Organisation of American States (OAS) Secretary-General Luis Almagro far away in Washington (perhaps trying to balance his calls for the release of Venezuelan political prisoners by also leaning on a centre-right government in the region) — now neighbours like Uruguay’s Tabaré Vázquez and Chile’s Michelle Bachelet are raising the subject.

This issue is rather more complex than either side tends to think. In the view of Morales her imprisonment is amply justified by the extremely serious charges of disruptive social violence and corruption against her. Yet the failure to follow due legal procedure was so crass in her case that talk of arbitrary detention extends well beyond her sympathisers — thus even such high-profile graft suspects as Lázaro Báez, José López or Ricardo Jaime were never flung into jail even before they had been arraigned. Double standards.

Yet beyond the legal irregularities (and also a highly personal mutual dislike between the two Jujuy leaders), Morales probably also has solid political grounds for such a stubborn stance. In last year’s general elections the Radicals had high hopes of winning half a dozen Peronist strongholds from Jujuy all the way down to Santa Cruz. Yet despite Macri’s coat-tails, these hopes came to nothing apart from an unexpectedly close win in Mendoza — and Jujuy, where Morales won a landslide 58 percent, over 20 points ahead of his Peronist rival. Short of Morales being a truly extraordinary candidate, the likeliest explanation of this striking result is that Sala’s Túpac Amaru “state within a state” is deeply resented by mainstream Jujuy society (much like pickets in this metropolis). Although since she herself was not a candidate, there is no way of directly gauging her popularity — one alternative theory might be that outgoing Peronist Governor Eduardo Fellner was so useless building houses, schools, health centres, etc. (under a public works scheme directed by the likes of José López) when compared to Túpac Amaru that the Morales landslide should be understood simply as a vote against Fellner himself rather than Sala.

But anyway at least one deputy from Jujuy’s ruling coalition was confident enough of this majority support to propose a plebiscite on Sala’s freedom (an idea rejected by Morales himself). This proposal was clearly outrageous — the next step to submitting justice to a popular vote is to accept lynch mobs. The Radicals are supposed to be the most institutionally correct members of Macri’s coalition when compared to their more pragmatic partners and yet both Sala’s highly irregular imprisonment and such extreme populist ideas stem from a Radical-ruled province.


Such concerns for civic rights as the Milagro Sala case seem more typical of the old powers of the 20th century (the Pat Derians, as honoured in last Monday’s ceremony) than the new of the 21st — Macri might not have to worry about such niceties if he accepted the logic of Donald Trump’s victory in the United States and looked to China as the new leader of globalisation. But while keenly interested in Chinese investment and trade partnership, Argentina is poised to deny China recognition as a market economy after 15 years in the World Trade Organisation (WTO) — as are the US (even more so under Trump), the European Union and Brazil, among others. Macri is misreading today’s world if he imagines he can finance a growing deficit by borrowing abroad — which also means that things like income tax become too important for political games.

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