New drop in tax revenue shows that Milei’s chainsaw is running out of room

The tax cuts and chainsaw-style fiscal adjustment driving President Javier Milei’s administration are jeopardizing one of his biggest achievements: the balance of public accounts. The seemingly paradoxical dynamic reappeared in April’s tax revenue numbers, down roughly 4% in real terms according to a report published on Monday. The drop was driven mainly by a fall in revenue from commodity export duties, chiefly beef and grains, which plunged 34.4% year-on-year in real terms, according to estimates by the Argentine Institute of Fiscal Analysis (in Spanish, IARAF). The government is collecting less from export taxes, not because trade slowed down, but because it cut those duties in July 2025. Other major taxes also fell: provincial gross income taxes and personal assets tax were down 21.1% and 15.3%, respectively, while import duties slid 12.5%. That last figure is a sign of just how sharply demand has cooled in industry and construction. Both sectors have historically been the country’s largest import buyers during economic upswings. Right now, they are in one of their toughest stretches, with activity levels comparable to the early months of the coronavirus pandemic. Chainsaw 2.0 April’s drop in revenue was no fluke. It marked the ninth straight month in which the state took in less in taxes than it had the previous year. Even so, fiscal surplus is one of the Milei administration’s signature achievements. He delivered one in both 2024 and 2025. The achievement is a milestone in itself: the last time Argentina ran a surplus was under Nstor Kirchner, in 2008. Milei has pledged a repeat for 2026. The country already posted a financial surplus of roughly 0.2% of GDP in the first quarter of the year. But getting there means continuing to cut spending to offset weaker tax collection. The bind for the government is that there are fewer and fewer places left for the chainsaw to do its work. Center-right think tank Fundacin Capital calculated that “without a rebound in revenue, spending would have to be cut by another 0.5 points of GDP.” The consultant firm went on to say that, if that were to happen, “public spending would fall to its lowest level in the past decade, which poses a challenge for several budget lines.” “Keeping up the same adjustment pace in certain components of spending for the rest of the year would mean deepening cuts in areas where the margin is already narrow.” Cuts that eat themselves According to a report by consultant firm Epyca, the surplus has become the symbolic anchor of the administration, which partly explains the rigidity with which it is defended. The think tank noted there are two ways to land a fiscal surplus. The first is through economic growth, which generates more revenue. The second is by cutting spending faster than revenue falls. “The first is sustainable because it rests on an expanding tax base. The second isn’t always, because if every cut shrinks activity and tax revenue, it requires a fresh round of fiscal adjustment to bring spending down again,” the report warned. Epyca added it was concerned that the administration “isn’t identifying any mechanism beyond fiscal cuts the ‘chainsaw’ to put public accounts on a sustainable footing.” “A little more than two years in, the message once again is that more adjustment is needed to sustain a surplus and that the adjustment will be hard and costly to carry out.