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The Ministry of Finance’s proposal on the pact for Economic Growth, Social Progress and Fiscal Responsibility has provoked a completely opposite reaction in the economic scenario. After a thorough analysis, the business associations have presented a report that offers an alternative vision on the fundamental axes of this government proposal, supported by concrete data.
The government’s tax proposals include a project to reform the income tax system that aims to increase structural income by 0.6% of the Gross Domestic Product (GDP) by 2027. This initiative, scheduled to enter in March 2024, seeks to ensure financing of 100% of the spending needs identified in the fiscal pact
Despite the positive assessment of the government’s approach to economic growth, the unions express their concern about the apparent insufficiency of these measures to boost the urgently needed economic recovery. For this reason, they propose the classic neoliberal measure, which is to reduce taxes to generate more economic growth.
Instead of supporting the Government’s tax proposal, the unions propose an alternative agenda focused on tax convergence and investment attraction. This proposal includes the reduction of the tax burden faced by companies and investors. What figures are used? They consider it necessary to reduce the first category tax from 27% to 23%, which would be similar to the average corporate tax rate in OECD countries. Likewise, they propose moving forward in reducing the total tax paid by capital, so that it converges from the current ceiling of 44.45% to 35%, which is the rate faced by foreign investors in our country, says the CPC.
Ricardo Mewes, president of the CPC, emphasizes the urgency of a competitive tax system to encourage investment, employment and improve quality of life. Although they recognize that his proposal is not fiscally neutral, they suggest mitigating schemes to counteract the additional fiscal impact that this tax reduction would imply.
In addition to the tax discussion, the unions emphasize the need for a more in-depth review of public spending. According to data obtained from the OECD, they consider the current effort in savings and reallocation of expenses insufficient, proposing the need to redesign the public sector to meet essential demands.
On the informality and evasion front, the unions advocate combating these aspects that significantly impact tax collection. They propose a set of measures aimed at promoting greater formalization and reducing evasion, supported by figures indicating an evasion potential of 5% of GDP.
In terms of investment, the unions highlight the importance of modernizing the process of granting sectoral permits. While they support the ongoing government project, they ask for more specific details to evaluate its effectiveness in simplifying and providing greater predictability.
This contrast between the government vision and the business proposal has triggered an interesting debate about the way forward to boost economic growth. Can they find common ground that combines the best of both worlds to establish strong and sustainable policies that boost the economy? This discussion will undoubtedly influence the direction of the country’s economic future.
