Argentina’s Digital Tax Push Drives VAT Evasion To Lowest Level In 20 Years

For years, Argentina was a case of a messy informal economy: people paid in cash, businesses under-reported sales, and the State often looked away.

A new study now shows something is changing, and it matters for anyone trying to understand where the country is heading.

Researchers at Universidad Austral estimate that companies failed to pay about 42 percent of the value-added tax (VAT) they should have owed in 2023.

That is still enormous, but it is the lowest level of VAT evasion in more than 20 years and seven percentage points better than the previous year. It also confirms a downward trend from levels above 50 percent not long ago.

The turning point is not a new ideology but something less glamorous: digitalization. Electronic invoices, card and QR payments, online cash registers and wider use of business bank accounts have created a trail of data.

When every sale leaves a trace, it becomes harder to pretend it never happened. Between 2019 and 2023, the number of corporate bank accounts rose strongly, and tax revenue grew faster than the taxed economy.

Argentina’s Shadow Economy Remains Enormous

Behind the averages there is a second story. Agriculture and commerce, long among the most evasive sectors, showed some of the sharpest improvements.

In farming, a terrible harvest and specific VAT rules pushed reported activity up and evasion down. In retail and wholesale trade, consumers’ shift to cards and digital wallets forced many small businesses into the light.

Yet the price of informality is still huge. The study calculates that lost tax revenue is roughly equal to 21 percent of Argentina’s annual output, with services, trade and construction as the biggest black holes.

In many of these activities, firms that dodge tax also tend to hire workers off the books, without social security or pension contributions.

For observers and foreign investors, the message is double-edged. On one hand, a country that starts enforcing rules and shrinking its shadow economy can become a predictable place to do business.

On the other, the size of what remains untaxed explains why every incoming government inherits strained public finances and pressure to raise taxes or tolerate a system where informality buys political peace.

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