The new administration’s economic team has begun work on a pilot plan for the implementation of a custom VAT. This proposal is part of the ideas presented by the Wide Front (FA) during the recent elections. Those in charge of this project, led by Gabriel Oddone, have recognized that its development will be a “very complex” process, which could complicate the fulfillment of the established objectives.
Sources close to the new government consulted by El País have indicated that the implementation of this measure could begin at the end of 2025 or the beginning of 2026. However, they have warned that, given the complexity of the variables involved, “it may not be achieved.” to meet this timeline.
Considerations on the impact of the new measure
A crucial aspect to determine is the economic impact that a measure of this magnitude can have on society. This is essential, given that the administration has emphasized the importance of implementation maintaining “neutrality” in relation to collection. The ability to achieve this neutrality will be a key indicator of the success of the proposal.
The term custom VAT refers to a system that allows the refund of this tax to certain groups of the population after payment. Said refund could be total or partial and can be made through direct returns or compensation. One of the tasks that the new government will have to face will be the choice of the most appropriate mechanism to carry out this proposal.
Strategic approaches and priorities of the new management
The elected president, Yamandú Orsi, mentioned this measure several times in his electoral campaign. It has also been discussed by the future Secretary of the Presidency, Alejandro Sánchez. Oddone stated this Tuesday that “it is a priority issue from a conceptual point of view, but it is not imminent”, which indicates that, although it will be addressed on the agenda, it will not be one of the immediate priorities in the first months.
Among the preliminary plans for its implementation, the border as a key area. Oddone indicated that this measure can be an “important instrument for small businesses that, especially in the interior, face difficult situations in terms of prices.” This approach could offer significant relief.
Proposals for the transformation of the tax system
The Programmatic Bases of the FA propose to “direct” the policy towards a custom VATfocused on reducing the tax on goods and services considered first necessity. This strategy seeks to transform the tax system, which consists of reducing consumption taxes, while increasing the burden on the income and assets of the wealthiest.
This approach aims to “advance the reduction of inequality.” The underlying idea is that “those with more wealth and income pay more”, freeing those with fewer resources from a greater tax burden. In this way, the creation of a more fair and equitable tax system is pursued.
Current Custom VAT Status
The mechanism of custom VAT has been in force in Uruguay from 2022, specifically for transactions made through the electronic wallet of the Ministry of Social Development (Mides) for those who receive certain family allowances. This fact represents an initial step towards a more extensive program that the new government intends to implement.
In the transition meetings, Oddone and Azucena Arbeleche, the current Minister of Economy, addressed these proposals in the context of the new direction that the government intends to take. Oddone emphasized the complexity of the fiscal situation and the importance of charting a clear path for future strategies.
