Javier Milei Says “Afuera!” To Argentina’s Tax Agency

“The state is a gang of thieves writ large.” This quote, attributed to libertarian author Murray Rothbard, exposes the state’s corrupt and extortionist nature. In that sense, Argentina has long been a tax hellhole, but things are about to change drastically after Milei’s closure of the country’s tax agency, Administración Federal De Ingresos Públicos (AFIP).

The AFIP, a greedy tax agency with perverse operational incentives (more on that below), is now being replaced by ARCA (Agency for Revenue Collection and Customs Control). Among other aspects, it will have not only fewer employees but also lower salaries. That’s a great win for Argentinian taxpayers! It’s far from perfect, of course, but a necessary trade-off to reduce government spending.

In this article, we’ll discuss these reforms in-depth, touching on the bold measures the Milei Administration has taken and why other countries around the world should take notes. 

FROM BLOATED TO SLIMMED-DOWN BUREAUCRACY

For decades, Argentina has been grappling with an economic crisis. Year after year, it consistently ranks among the world’s top five nations with the highest inflation and endures some of the most severe poverty rates. This is a byproduct of excessive government spending, monetary emissions, and the number of people who live off the state. 

As Hayek said, “If socialists understood economics, they wouldn’t be socialists.” It’s all a numbers game, but socialism has taken over Argentina and turned it from one of the richest countries in the world to one of the poorest. 

That’s exactly why Milei won the last presidential election. He’s a self-declared libertarian who ran for office promising radical spending cuts, which would help Argentinians keep more of their hard-earned money in their pockets. The closure of the AFIP is a huge victory, as it will ease a significant burden off the taxpayers’ shoulders. 

In terms of numbers, the achievements are massive. As spokesman Manuel Adorni explained at a press conference, “45% of the senior authorities (the political class) and 31% of the lower levels of the current structure will be cut. This means that, overall, 34% of public positions will be eliminated. Additionally, around 3,100 employees hired irregularly during the last government will be reassigned or dismissed.”

Take a moment to let all of that data sink in. Before Milei, there was evident nepotism and vote buying going on—no wonder why socialism is that pervasive in Argentina. However, Milei’s bold reform is an attempt to crush inefficiencies and minimize the overreach of the tax authority. As if that weren’t enough, he’s even gone one step further by cutting outrageous salaries!

ENDING EXCESSIVE SALARIES

The government loves dictating how much money is “too much” and granting itself the right to take a chunk of it via taxes. Indeed, government employees are not public servants at all. Instead, they’re more like slave masters going after you so that you pay your “fair share.” 

Argentina’s AFIP was no exception, and to add insult to injury, its employees were compensated handsomely for extracting wealth from Argentinians’ pockets. Imagine getting paid thousands of dollars for making the lives of regular people a true hell-on-earth. Yes, you read that right—these government employees were getting thousands of dollars every month. How much, you ask? Top executives were cashing in $30,000 USD! Not yearly, but monthly! 

All these economic incentives encouraged political cronyism and corruption, with politicians favouring friends and allies for these high-paying positions. However, Milei will reduce the salaries of top executives from $30,000 USD to $4,000 USD, further showing his commitment to minimizing government spending. Manuel Adorni said, “From now on, both the head and the directors will be paid salaries equivalent or comparable to those of ministers and secretaries of state.” According to Milei’s expectations, implementing these measures will save Argentinians around $6,4 billion ARS (roughly $6,5 million USD). 

Related content: Javier Milei’s Argentina: Assessing The Prospects For Expats

Milei is tackling corruption by eliminating AFIP’s incentive system, which rewarded aggressive tax collection, and replacing it with ARCA to end performance-based bonuses and reduce systemic abuses

ELIMINATING SHADY INCENTIVES

In addition to the much-needed salary and personnel cuts, Milei has made another bold move to save Argentinians money: eliminating the so-called “hierarchization accounts.” Long story short, these were perverse operational incentives for all of the AFIP, as employees used to receive 0.65% of the total annual tax revenue as a performance bonus. 

That’s right: the more tax revenue they collected, the higher the paycheck for every government employee. This system rewarded aggressive and extortionate tactics against taxpayers. By shutting down AFIP and creating ARCA, Milei is putting an end to these “performance bonuses” for tax officials. 

“Throughout its existence, this agency has functioned as a political cashbox,“ remarked Adorni. All these incentives, from the high salaries to the hierarchization accounts, have provoked systemic corruption. Now that these incentives seem to be gone, the administration seeks to curb abuses.

Such reforms challenge the status quo, where unchecked government leads to endless stagnation and hinders individual prosperity. More countries around the world should take note of this

CONCLUSION

Milei’s actions send a clear message that bureaucratic excess and inefficiency will no longer be tolerated. Rather than enslaving taxpayers with endless tax increases that curtail their economic freedoms, Milei has decided to reduce spending by eliminating the incentives that drove AFIP’s predatory behaviour. Adorni pointed out, “No bureaucrat has the right to tell an Argentinian what to do with their property.”

These reforms challenge the status quo, where unchecked government enables never-ending cronyism and complicates individual prosperity. More countries around the world should take note of this. When bloated, inefficient government agencies are dismantled, and incentives to oppress taxpayers are removed, a society can go back to being freer and more prosperous.