Motives and Constraints in the Implementation of Argentina’s 2017 Tax Reform

This paper examines the motives, constraints, and sequencing behind Argentina’s 2017 tax reform, drawing on the authors’ direct involvement in its design and implementation. We document how a large inherited fiscal imbalance, a disinflation program that mechanically raised real pension spending under the pre-existing indexation rule, minority status in Congress, and limited administrative capacity jointly narrowed the feasible policy set. Within those constraints, the reform aimed to be near-revenue-neutral while rebalancing the system toward investment and employment: phasing down corporate rates with dividend taxation and inflation adjustment, reducing the labor wedge at the bottom via a per-worker deduction, rationalizing VAT and excises (including carbon and health-motivated taxes), and coordinating with provinces to cap and de-cascade the turnover tax (ISIB) through a Fiscal Consensus. We trace how coalition politics and sectoral vetoes reshaped the package, why forward guidance and escape clauses were embedded ex ante, and how the 2018 sudden stop, followed by policy reversals, limited the reform’s realized growth dividend. We draw four lessons: credibility is a fiscal instrument; provincial coordination beats technocratic perfection; discretionary levers invite rent-seeking; and targeting informality and compliance margins yields higher returns than blunt rate changes. The analysis offers a pragmatic template for tax reform under macroeconomic fragility, federal fragmentation, and state-capacity constraints.