Tax reform: this is what the national government would present

The number of taxpayers will increase, as well as the ceiling to pay income; it would be from 2.5 million pesos per month.

No additional food will be taxed with VAT in addition to those already taxed. Elimination of exempt income, deductions, tax discounts and preferential rates as of 2023.

On March 24, 2021, the Ministry of Finance informed that at the request of the congressmen the tax reform, which will be presented under the name of Sustainable Solidarity Law, will be filed in the Congress of the Republic once Easter Week is over.

With this law, the national government aims to collect 25 trillion pesos, which will be directed to social programs such as Solidarity Income and the VAT refund to about 4.7 million households living in poverty, among other investments.

Based on publications that have been published in the last days by several media, these are some of the issues that are being considered to be included in the next tax reform bill.

19% VAT rate and exempt category would be eliminated.

With regard to VAT, neither additional foodstuffs nor their production chains will be taxed with this tax in addition to those already taxed. In this way, the consumption of lower-income households would be protected.

The category of goods and services exempt from VAT would be eliminated, except for exports. It is also planned to eliminate the 5% rate, which would automatically increase to 19%.

Regarding the VAT refund, the Government expects the coverage to increase from 20 % of the population to 40 %, which would translate into some 4.7 million households. In addition, the monthly transfer per household would be $45,000.

A greater contribution from the income tax for individuals.

“An objective that the Government has focused on natural persons is to obtain 14 trillion pesos by eliminating income tax exemptions for natural persons.”

An objective that the Government has focused on natural persons is to obtain 14 trillion pesos by eliminating income tax exemptions for natural persons, of which 1.5 trillion pesos would come from the hand of new taxpayers.

This would be achieved by broadening the taxpayer base and lowering the amount from which taxpayers declare and pay. The ceiling would no longer be 4 million pesos per month but 2.5 million pesos per month.

Two billion additional pesos

Through the tax on dividends, the permanence of the wealth tax and the return of the solidarity tax, which would levy a 10% tax on all those who earn a monthly salary of more than 10 million pesos, an additional one trillion pesos would be sought.

Marginal rates for legal entities

Focusing on legal entities, the reform presents a marginal rate scheme starting from profits of 500 million pesos, starting at 24 % for small companies and establishing a maximum rate of 31 % in 2022, which would be reduced to 30 % in 2023.

It also proposes the elimination of exempt income, deductions, tax discounts and preferential rates as of 2023, respecting acquired rights.

The benefits that currently exist focused on the orange economy and tourism will be in force until 2022. On the other hand, the regimes for mega-investments and free trade zones will be maintained.

Taxes with the environment in mind

The carbon tax will be modified to include all fossil fuels, which will provide an additional 600,000 million pesos.

The bill will propose a tax on vehicles to internalize the costs of local pollution, which would raise 440,000 million pesos.

Similarly, a tax on single-use plastics would be created to generate efficiency in the use of materials, as well as a tax on the consumption of pesticides and reduction of soil pollution. These two taxes would raise 74,000 million pesos.

Other measures set forth in the tax reform

–Theincrease in the salaries of civil servants would be frozen, which would seek to raise an additional 350,000 million pesos.

– Pensions of more than 7 million pesos wouldbetaxed, as recommended by the Commission of Experts on Tax Benefits.

– The VAT discount on capital goods and the 50% ICA discountaremaintained.

– Temporarilyextendthe Paef until June of this year.

–Modifythe allocation and targeting of subsidies to public utilities of electric power and gas distributed by physical network.

Source: Actualize