Sunday, July 15, 2007

Uruguay advances, tax reform

Uruguay advances (Uruguay Avanza). That's the slogan the Uruguayan government is using to market the new tax reform, as a positive change.

The reform entered into play the first of july. We were all required to fill, sign and present a form to each employer before 29th june.

Among the changes introduced by the reform 14 taxes were derogated, and were replaced by only one, called IRPF, in an attempt to simplify our tax system. VAT (IVA) was reduced from the astronomic 23 to 22 (not much if you ask me) for all items except some categorized as basic (canasta basica) which had a greater reduction.

Anyone earning 25.000 (around 1000 usd) nominal, will be negative affected by the tax, meaning will earn less money by the end of the month. This obviously makes a lot of people not so happy with the new tax system. Some even call it the end of Uruguayan middle class.

Uruguay's minister of economy, Danilo Astori, has of course, a different, more optimistic, view on things, he says this reform will benefit 80% of the population.

I'm no specialist, I don't have a clear position on whether this reform is a positive change or not for the country, but I'm glad the government is at least trying to do something different. I'd gladly earn less, if someone could assure me that this is actually going to benefit those in need in Uruguay.

I find that what they are trying to accomplish is very tough, and to some extent even maybe incompatible with Uruguayan banking secrecy (which I think should be removed, but that's a whole different post).

My fear is this will make little or no difference for those in need, and will place a heavy burden on the Uruguayan middle class, people that in cases resort to working in more than one place, 12 hours a day, to earn a decent living.

It's still too early to tell, we can only hope Astori's bet is a winner.

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