Lorenzo Gabriel Dávalos Baigorria
In these times when the difficulties we are going through as an economic matters have reached its highest peak, in which they are evidenced in the various segments of society, including the business sector, the need to rethink the need to rethink with remarkable The Bolivian economy in full, to give certainty to the main economic challenges that the country faces, the questions and doubts, transcend the macroeconomic figures, affect the stability and sustainability of the companies at all levels and directly proportionally affects the Welfare of millions of Bolivian families.
Faced with this worrying scenario, we cannot avoid looking with a different approach our Tax Code and the Tax Administration that shows its tax pressure in a very suffocating way. In this sense, emphasizing a tax look is already an immediate necessity, reviewing and adjusting the current tax policies with the requirement of current economic reality.
Is it necessary to reduce the tax burden? Let’s look.
The tax structure and institutional barriers in our country, hinder business development and encourage informality and smuggling. The fiscal pressure together with the complexity of the Bolivian tax system, with a fragile institutionality and procedures for the defense of the taxpayer too expensive, imposes significant barriers for formal companies.
One of the biggest challenges is Transactions Tax (IT), which operates as a cascade tax and disproportionately affects companies with low margins and high inventory rotation, complicating their operation. In addition, the initial fiscal charge for a new company, where the government takes 84% of its income in the first year, together with the need to make 42 annual tax payments (compared to an average of 28 in South America), discourages Formality. These factors, added to the disproportionality of fines, create an environment that promotes informality and smuggling, since operating outside legality may seem more viable than complying with the onerous tax and administrative obligations.
Informality in Bolivia is a systematic and structural problem that hinders economic development, weakening tax collection, productivity, and long -term economic growth. In 2019, 80% of the workforce in Bolivia was in informality, which means that only 20% of workers were in jobs with adequate social security degrees (short and long term) and industrial. This high level of informality has multiple negative repercussions. In fiscal terms, informality significantly reduces the tax base, which causes lower tax collection. For example, only 30% of the consumption of certain products, such as textiles and footwear, comes from legal imports, while the rest is attributed to smuggling and informality. This situation also seriously affects the productivity and competitiveness of the Bolivian economy.
So what measures should be adopted to the decadent tax system?
A tax return program that includes incentives for the informal sector could significantly increase collection and improve formality in Bolivia. Informality in Bolivia is a considerable challenge, affecting both tax collection and economic structure. An approach to address this problem is the implementation of a tax return program that encourages informal workers to integrate into the formal system. The tax return program can compensate for the reduction in the collection of transactions tax (IT) – in the hypothesis of eliminating this tax – and, at the same time, encourage the formalization of the Bolivian economy.
It is very necessary to implement deep tax adjustments measures and manage public finances as handled at the private level, that is, Bolivia as a company to face the crisis and to promote a prompt recovery. In addition to this, promote mechanisms that would allow its implementation without affecting the most vulnerable population with transfer schemes that focus and optimize social policy.
