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FACTBOX-Argentina's reform priorities after midterm elections

BUENOS AIRES, Oct 19 (Reuters) - Argentines will head to the polls on Sunday for midterm legislative elections that could determine the future of market-friendly President Mauricio Macri's reform agenda.

Below are the two-year-old administration's lingering policy priorities.

BUDGET

First on the administration's list will be passing the 2018 budget, which aims for a fiscal deficit worth 3.2 percent of gross domestic product (GDP), down from an expected 4 percent in 2017.

The government is relying on 3.5 percent economic growth in 2018 to boost tax revenues to shrink the gap. The budget, presented to Congress last month, includes cuts to economic subsidies worth 0.6 percent of GDP, but keeps infrastructure spending flat and increases social welfare spending.

TAXES

Treasury Minister Nicolas Dujovne has pledged to deliver a proposal to reform the tax code to Congress after the elections. Many of Argentina's tax rates are above regional and global averages, which businesses say harms the country's competitiveness.

Rather than reduce overall tax income, the proposal is expected to make changes to what officials call the most "distortive" taxes, while attempting to widen the tax base through cracking down on evasion and informal employment.

CAPITAL MARKETS

A proposed reform to Argentina's capital markets regulations has stalled in Congress since last year, but Finance Minister Luis Caputo says he expects it to pass this year and that the government will push for its approval following the elections.

The bill would amend a provision allowing Argentina's securities regulator to remove company board members, and ease restrictions on foreign investment.

LABOR

While neighboring Brazil recently implemented a comprehensive labor reform, Macri told Reuters in August that Argentina would not go that route and instead would continue negotiating with unions in specific sectors to lower labor costs.

In addition, Labor Minister Jorge Triaca said in a recent television interview that the government was negotiating a "labor amnesty" with unions to formalize the 4.5 million Argentines working off-the-books. The deal would include incentives to employers and better enforcement tools for the state.

PROVINCIAL SPENDING

The government has reached a deal with most of the country's 24 provinces, which depend on the national government for a substantial portion of their revenues, to ensure that their spending growth does not exceed inflation.

The deal, which also places limits on hiring public employees, needs to be approved by Congress. Ratings agency Moody's said the law would be credit-positive for the provinces. (Reporting by Luc Cohen, Editing by Rosalba O'Brien)