The Colorado representative Gustavo Zubía will not vote on the project as long as he maintains this tax on retirement and the Cabildo Abierto includes its reduction as one of its conditions. Is it feasible?
He Social Security Assistance Tax (IASS) returns to the scene in full debate for the social security reform in Uruguay, being one of the points of contention between the deputies of the coalition, as well as the argument behind the negative vote of, for example, the colorado Gustavo Zubia. For the government, the repeal of this tax, in the short term, is not feasible, but what implications would it have on public accounts?
Zubía’s negative vote has already been announced: the legislator will not support the pillar project of the government’s reformist agenda. For his part, Open Town Hall (CA)Among its many conditions, it requires a commitment to reduce the tax. The requests are not unreasonable either, since it was a campaign promise from the president Luis Lacalle Pou.
However, the state of the fiscal accounts, although they have improved in recent years, would not bear the impact of the reduction in this collection; even less in a context in which the International Monetary Fund (IMF) warned the country regarding its debt levels.
But in the same discussion for the reform of social security, the possibility of repealing the IASS loses meaning: as explained by Nicolás Lussich in his InformaCARVE program, the total collection of this tax goes to the Social Welfare Bank (BPS); Therefore, its elimination would imply cutting resources for the organization that the reform aims to improve in terms of financing. That is to say, it would be nonsense and even a reversal.
What is the participation of the IASS in the accounts and what impact would its elimination have?
This is not a new issue on the table: prior to March 2 and the speech of Accountability of the president, with the announcement of the reduction in both the IASS and the Tax on Personal Income (IRPF), estimates were already made regarding the impact that the tax modification would have on the public accounts of the State. Even then there was talk of an increase in fiscal deficit as a direct consequence of lower collection.
During 2022, the IASS contributed income of 14,893 million pesos to the state coffers and implied a participation of the 2.5% in the Gross Domestic Product (GDP) of the country the year in which the total fiscal deficit was 3.4% —in February it remained at the same levels. With the tax reduction expressly approved by Parliament in March, the government advanced a tax waiver of 30 million dollars—only with respect to the tax on social security assistance—which, in turn, had a direct impact on BPS revenue.
If a similar income is considered for the current year, one could speak of 7.8% less annual collection in an organization that, through the social security reform, seeks to improve its financing status. The impact of the reduction, according to the government, can be resolved through the fiscal consolidation achieved in recent years; but a 100% reduction —with the repeal of the tax— would imply a substantial deterioration in the institution’s accounts and a contradiction itself with the objective of the project that is being discussed in Special Commission of the Chamber of Deputies. In any case, one question would remain unanswered: where to get the resources to compensate for the decrease in income to the BPS.
Source: Ambito
