With specific cases, the economic team affirmed that the tax reduction “increases the real income” of workers
A worker who today earns a nominal salary of $50,000, who does not have minor children or a dependent spouse, today pays $12,500 a year for Personal Income Tax (IRPF). About $1,000 per month. With the law that will be voted on next week in Parliament and that proposes what the government defines as a “historic” tax reduction, he will pay $7,811 a year -about $650 a month- with which he will have a reduction of 38 %.
Another person with the same salary, but with a dependent minor child, will pay $740 a month for that tax today. As of the effective date of the law, she will not pay anything.
These examples were presented to Parliament this Thursday by the director of the Tax Department of the Ministry of Economy and Finance, Pía Biestro, when the economic team went to defend the bill, in order to demonstrate the impact that the measure will have on the beneficiary pocket.
Finally, a person with a nominal salary of $60,000, with a minor child and who rents an apartment with his spouse for $18,000 a month, today pays around $1,800 a month in personal income tax. With the new law, it would be taxed 55% less, about $838.
The data used by Biestro correspond to the last closing of the campaign of the General Tax Directorate (DGI), which is from 2020. The ministry estimates that the measure will reach 75% of IRPF taxpayers, some 327 thousand people. Of that number, some 207,400 will see “significant benefit” and, of these, 63,000 will stop paying the tax.
“This impacts that there will be more money in Uruguayan homes,” said Biestro. “The real income of workers is increased, in addition to the wage recovery already underway and the generation of employment already achieved.” The tax waiver for this measure will be US$ 80 million.
In the case of the Social Security Assistance Tax (IASS), no deductions are applied, but a credit is established for leasing real estate under the same conditions as personal income tax. Here the new law will raise the non-taxable minimum to 9 Tax Benefit Bases – about $50,940 per month, and from 6% to 8% the rental credit.
According to the ministry, 20,000 retirees and pensioners will stop paying the tax.
The two VAT points
The Broad Front will vote on the project, but its members made their objections to the structure of the initiative clear to the minister. Senator Mario Bergara stressed his vision that these reliefs are aimed at lower-income taxpayers, not workers and people with lower income, considering that today 70% of the population does not pay these taxes.
“Even with the same tax waiver, a set of measures that would cover the entire population could have been thought of,” he insisted. For example, establishing again the return of the two VAT points through payments by electronic means, eliminated by the current administration. That would imply, the senator maintained, favoring more than 85% of the population, which uses this mechanism in 70% of the payments made throughout the country, he said, citing Central Bank statistics.
This earned Bergara a counterpoint with the ruling party. According to the director of the Office of Planning and Budget (OPP), Isaac Alfie, the benefit of electronic payment is concentrated in the middle and high income sectors, since what is taxed with VAT not in the family basket does not reach 60% . “Find out in the collection networks what people do when they collect their salary, passive or allowance and you will see that a very significant percentage – more significant as income falls – go and withdraw all their money in cash,” he said. (The country)
