The Government suspended the increase in taxes on liquid fuels. It did so through Decree 864/2022, published this Friday in the Official Gazette. However, A 4% increase is scheduled for fuels that participate in the Fair Prices program.
Regarding the delay in the tax increase, The Government seeks to avoid an adjustment in the prices of gasoline and diesel, which will now be applied only from April 1, 2023.
This is a new extension of the fuel tax that, in principle, must be updated by calendar quarter based on variations in the Consumer Price Index (CPI). However, the Government has been postponing its application so that it does not impact supplier prices.
The Executive Branch justified this new extension by stating that “in the case of consumption taxes and given that the demand for liquid fuels is highly inelastic, the variations in taxes are transferred practically directly to the final prices of fuels.”
In this sense, he stressed that “in line with the measures implemented to date and in order to ensure a necessary stabilization and an adequate evolution of prices, it is reasonable, for unleaded naphtha, virgin gasoline and diesel, postpone until April 1, 2023 the effects of the increases in the amounts of the taxes”.
For its part, at the end of last November, the Ministry of Economy closed an agreement with the oil companies YPF, Shell, Axion and Puma through which gasoline and diesel should not rise more than 4% during the first three months of 2023 and 3.8% in the fourth month. In this way, fuels joined the Fair Prices program, which establishes fixed prices for some 2,000 basic necessities for four months, and a maximum increase of 4% for another 30,000 items.
“We are going to have December, January, February and March with a predefined path of increases: 4% in December; 4% in January; 4% in February and 3.8% in March, with the aim of continuing to build a path in which all sectors contribute to significantly lowering inflation, which is the main drama in Argentina,” Minister Sergio Massa said in a meeting that he held at the end of November with directors of the oil companies.
