The federal government has signed a funding deal with 22 of the 23 provinces which will put an end to the provinces' litigation over undelivered funding and mark a new era in relations between the national government and its provincial counterparts, national Cabinet Chief Marcos Peña told reporters yesterday at a somewhat jovial press conference at Government House.
The provinces agreed to lower income tax and stamp duty by 1.5 percent of GDP in the next five years; implement local tax responsibility laws through 2018; and drop litigation against the federal government to the value of 740 billion pesos in undelivered funding.
This included 400 billion pesos owed to the so-called Fondo del conourbano (Greater Buenos Aires fund), a claim to which Buenos Aires province has agreed to abandon in exchange for a 10-percent cut in income tax revenue.
For its part, the national government agreed to fund the provinces' deficits and provide a more stable cash flow from the national coffers.
Interior Minister Rogelio Frigerio had met with governors Thursday morning in Buenos Aires in a final session to agree on the terms of the deal. The meeting at the Federal Investment Counsel (CFI) came after a long day of talks on Wednesday in which provincial leaders discussed dropping court cases against the Federal government for undelivered funding.
The governors’ concerns have traditionally centred around the implications of any new deal on the income they receive from tax coparticipation arrangements with the federal government.