The International Monetary Fund (IMF) considered that Latin America should “beware” with increases in the minimum wage because, if they are very strong, they can lead to a greater shadow economy.
In an interview with EFE on the occasion of the publication of the Fund’s regional report, the interim director of the Fund for the Western Hemisphere, Nigel Chalk, recalled that the shadow economy is a widespread problem in Latin America that affects all the countries of the region in to a greater or lesser extent, and has proposed “combined” actions to deal with it.
He indicated that he opted for measures such as those adopted in the United States, where the lowest incomes have a “tax credit” for which money is returned to them and they do not pay more taxes.
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In addition, he referred to the fact that progressive fiscal reforms are being promoted in some countries, as is the case of Chile and Colombia.
“We are seeing progress with tax reforms that focus on progressivity” with higher taxes for higher incomes and lower ones for those who earn less, and that “will help” reduce informality, he maintained.
But he warned that care must be taken with the rules that are approved for the labor market, because “the tougher they are, the more likely it is that employers will move towards the underground economy” so as not to have to comply with them.
At this point, he warned that you have to have “great care” with the minimum wage in Latin America, because its increases can lead employers, especially small businesses with little margin to obtain profits, to move towards the shadow economy and have their workers outside the system.
effects
On the other hand, the expert The IMF warned of the negative effects that a high rise in social contributions such as the one being promoted by some countries in the region could have.
In his opinion, they can go in “opposite direction” to what is desired and once again lead many to opt for the shadow economy.
He gave as an example Chile – the country in which the report is presented this Wednesday – which, in its reform of the pension system, proposes to increase contributions to Social Security. “I am not saying that it is wrong to do so, but care must be taken so that this does not lead to informality” economic.
For this reason, he insisted on the need to studythe entire tax burden” at the same time, especially in the case of the lowest incomes, to prevent them from preferring to be outside the system.
In any case, Nigel Chak appreciated that there are tax reforms underway in Latin America focused on achieving progressivity and ensuring that all levels pay according to what they earn, especially high income earners, while reducing the burden of lower income earners. low.
With information from EFE
