The Minister of Finance and Economy, Magin Diaztoday agreed with the application of a partial salary indexationas long as this measure does not affect the financial stability nor the macroeconomic sustainability of the country.
“I would agree with a partial indexingas long as the financial stability public. That’s what’s important,” said the official when asked about the possibility of applying the mandate that adjusts salaries according to inflation to retain the income tax (ISR).
- If indexation is applied, salaries would be above 50,000 pesos per month that would pay ISR and not from 34,685 pesos as is the case.
Díaz clarified that this provision is not a new measure, but rather has been applied since 2017. He recalled that at that time only about 10% of employees paid the income tax. As he explained, the decision sought to expand the tax base.
The head of the Treasury and Economy maintained that the issue must be analyzed inside a comprehensive tax reform and not as an isolated action.
“We cannot focus now on taking isolated measures. I think we can discuss it within the framework of a extensive reform“he pointed out.
Tax impact
As for the fiscal impactDíaz warned that applying indexation completely and immediately could imply a significant loss of income for the Government, which would put the debt and fiscal deficit goals at risk.
However, he assured that the ministry is open to evaluating proposals together with the Central Bank, always maintaining the macroeconomic prudence.
Will a tax reform come?
About a possible tax reform or taxDíaz indicated that at the moment he is in a listening stage with the different unions and sectors productive.
“I have met with more than 50 unionsbut I have not yet discussed the issue of reform with the president. We are focused on the budget modification and increasing capital spending,” he said.
About the damage caused by Melissa
In relation to the resources to face the damage caused by Hurricane Melissa, the minister assured that the Government has sufficient liquidity and that the budget law allows increasing spending appropriations in cases of public calamity.
“He Government has money to meet the expenses that arise after the disaster,” he stated.
Furthermore, he explained that, in accordance with article 43 of the Budget Law, the Executive can increase up to 0.5% of GDP in spending appropriations when a natural disaster.
The president, he added, will evaluate together with the institutions corresponding if it will be necessary to declare a state of emergency.
The official concluded by highlighting that the recent stoppages were “necessary and timely to save lives”and that the economic authorities will take the required measures to reactivate economic activity in the coming months.
