16 further formalize the economy. Small business employers often cannot support these benefits and hence must resort to operating mainly in the informal sector to survive. A third major barrier is tax complexity. The time needed for businesses/employers to prepare and pay taxes is 310 hours in Argentina—nearly double that in North America and the EU—and is significantly higher than the world average of 234 hours. Although it remains high, Argentina’s time to prepare and pay taxes has decreased significantly over the past two decades; in 2006, the average time was 453 hours. The driving factors behind this decrease were tax reforms that have attempted to simplify the process by reducing the number of payments necessary and introducing new technologies. Despite the progress, more work remains to further simplify the tax system. A host of studies have shown a strong correlation between complexity of tax compliance and rate of informal work because many employers and employees do not register and pay taxes (World Bank, 2019). A company must file an annual income tax return and financial statement and make ten tax payments during the year to complete its tax liability for the previous year. For both workers and companies, Argentina operates a self-assessment tax system. For individuals whose only source of income is employment income, their employers must withhold income tax, which is counted as their final tax, and they do not need to file a tax return. This system places the burden on employers, not employees. Individuals with other sources of income must file those taxes themselves. Furthermore, many of their transactions are done on a cash basis, so it is unlikely many of them have access to a bank account. There are strict fines on both individuals and companies for late or missing taxes. Adding to the problem, all filing must be electronic, which directly affects both those informal business owners and informal employees working side jobs who do not have internet access. Therefore, Argentina’s fully digitized tax process actually limits the number of taxpayers and inhibits workers and companies from formalizing. The current process needs to be revised to create a more flexible digitized process that can be slowly tested with Argentina’s population. Furthermore, there should be options to use paper submission for those unable to access the internet for tax filing purposes. Current Government Policy In a few promising, but still limited, fits and starts, the government has enacted a handful of new laws over the past few years. In 2016, the legislature passed an act that gives tax advantages and increased credit access to small and medium-sized businesses. In addition to refunding the standard 21% VAT tax for smaller firms’ purchases, the law required all companies to accept debit cards and issue electronic payments. Lawmakers also required the use of electronic invoices to reduce paperwork costs and required tax payments through debit/credit cards or bank transfers to simplify the tax payment process. In 2017, the legislature passed an act establishing a new type of simplified company, called the simplified joint stock company. This type of company makes it much easier to gain capital, establish rules of operation, and start a new business, which should greatly help small and medium-sized businesses enter the formal sector. These changes have been implemented to minimize costs for small businesses and reduce the complexity and length of the tax payment process. Whether the changes have worked to shrink the informal sector remains unclear given the recent economic instability. Since these new laws were enacted, the informal sector has not decreased but rather has increased (OECD, 2021). It is difficult to measure the effectiveness of these laws during a major recession and during COVID-19, when unemployment and poverty undoubtedly would have increased no matter the policies in place. Although it is difficult to measure currently, these changes do not seem to be enough and more major changes need to be made. Argentina’s government policies and perspective concerning ways to move forward with the informal sector are currently unclear. As of early 2021, Argentine President Alberto Fernández had not proposed clear policies or announced any explicit wide-reaching plans regarding the informal sector. Javier Lindenboim, head of the University of Buenos
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