Javier Milei’s Bold Move: What Happens When AFIP Is Dissolved?

Javier Milei's Bold Move: What Happens When AFIP Is Dissolved?

In a bold move to cut government spending, President Javier Milei has announced the closure of Argentina’s tax agency, branding it an “unnecessary bureaucracy” that hinders economic freedom.

At a glance:

  • Argentina’s tax collection agency, AFIP, will be replaced by a new entity called ARCA, aiming to simplify tax and customs operations.
  • The restructuring involves a 34% reduction in staff, laying off over 3,000 employees hired under the previous administration.
  • The government expects annual savings of $6.4 million as a result of the changes.

On Monday, October 25, 2024, Argentine President Javier Milei’s administration confirmed that the Administración Federal de Ingresos Públicos (AFIP) would cease operations. Manuel Adorni, the presidential spokesperson, declared that a new agency, the Agencia de Recaudación y Control Aduanero (ARCA), will take over tax and customs responsibilities. The closure of AFIP is part of Milei’s broader agenda to streamline government and reduce Argentina’s fiscal deficit.

According to Adorni, AFIP functioned as a “political cash box” under previous governments, using its authority to exert pressure on citizens. He argued that its elimination is a necessary step to boost economic freedom and reduce state intervention in private property matters.

The new ARCA agency promises a “simpler, more efficient, and less costly” structure, with a focus on professionalizing staff and rooting out corruption. This shift includes a 34% reduction in the workforce, primarily targeting employees who were “irregularly hired” during former President Alberto Fernández’s tenure. Additionally, the reorganization will see a 45% reduction in senior positions and a 30% cut at lower levels. Salary reductions for high-ranking officials are also planned to align their pay with that of Cabinet ministers.

Milei’s administration projects annual savings of 6.4 billion pesos (approximately $6.4 million) due to these changes. The shake-up has not come without controversy, as Argentina’s AEFIP union, representing AFIP employees, has threatened strike action in response to the layoffs. Union leader Pablo Flores voiced concerns over the future of the 3,100 jobs affected by the decision, warning of potential protests.

Since taking office in December, Milei has pursued a series of radical reforms to reduce government spending. These efforts include downsizing multiple ministries and introducing legislation to simplify government operations. The dissolution of AFIP is the latest step in his campaign to curb what he views as an overextended and inefficient state apparatus.