Argentina Evaluates a Dual VAT: What Can We Learn from Brazilian Tax Reform?
- Daniela Lavin
- May 12
- 3 min read
The Argentine government is working on a comprehensive tax reform, with a particular focus on the Value-Added Tax (VAT), as Minister Caputo announced in recent media statements.
The proposal seeks to divide the VAT into two components: one national and one provincial, to foster fiscal competition among provinces.
The government plans to present the tax reform bill to Congress after the December 2025 legislative elections. If approved, implementation could begin in 2027.
What is a Dual VAT?
A dual VAT model divides the tax into two levels of collection:
A national (federal) VAT, similar to Brazil's CBS – Contribution on Goods and Services.
A subnational VAT (provincial and municipal), equivalent to Brazil's IBS – Tax on Goods and Services.
The goal is to unify and simplify the multiple taxes currently in force, reducing complexity and administrative burden and increasing transparency.
Proposed VAT Structure in Argentina
National VAT: The national government would retain a base rate of 9%, reflecting its primary share in the federal revenue-sharing scheme.
Provincial VAT: Provinces would be allowed to set their additional rates, up to the full 21%. Each province would determine its rate based on its own fiscal needs.
Goals of the Proposed Reform
Encouraging fiscal competition: Allowing provinces to set their rates aims to promote healthy competition to attract investment and improve public spending efficiency.
Eliminating distortionary taxes: The reform seeks to replace the Gross Turnover Tax (IIBB), considered regressive and distortionary, with a more transparent and equitable system. In Argentina, this tax's burden exceeds even the average corporate income tax collection in OECD countries.
Enhancing provincial autonomy: The reform would return to provinces the capacity to define their fiscal policies, reinforcing federalism and local responsibility.
Challenges and Considerations
Redefining revenue-sharing: This model would require a revision of Argentina's federal revenue-sharing system since provinces would directly collect part of the VAT.
Risk of unfair competition: Different rates across provinces could lead to imbalances and "fiscal wars," harming system equity and efficiency.
Political consensus: The reform will need congressional approval and support from the provinces, requiring negotiation and alignment.
Brazil as a Reference: How Does Its Dual VAT Work?
In January 2025, Brazil passed Complementary Law 214/2025, creating its dual VAT system. The new structure will gradually replace the following taxes:
PIS and Cofins (federal)
ICMS (state-level)
ISS (municipal)
Part of IPI, replaced by a new Selective Tax
The reform, which took over 30 years to materialize, follows a phased implementation timeline:
2026: Inclusion of CBS and IBS in electronic invoices (non-binding).
2027: CBS and IS go into effect; PIS and Cofins are eliminated.
2029–2032: Gradual transition from ICMS/ISS to IBS.
2033: Full implementation of the new system.
What Can We Learn from Brazil's Experience?
Although it's early to assess results, some key takeaways include:
Real but gradual simplification: Brazil is adopting a seven-year transition. Argentina should consider a similar approach to avoid economic disruptions.
Interjurisdictional coordination: Brazil established an IBS Managing Committee to oversee subnational administration. Argentina will need strong political and technical coordination between national and provincial governments.
Technological infrastructure: Brazil is building a national digital platform (CBS/IBS Platform by SERPRO) to centralize data, validations, and fiscal exchange. This will be crucial for Argentina as well.
New compliance culture: The new system emphasizes structured data, automatic reconciliation, and transparency. Companies will need to adopt technological tools to stay compliant.
