The collection of the DGI It fell 3.5% year-on-year in August and in the moving year (the last 12 months compared to the previous 12 months) it shows a decline in real terms for the first time in a long period. The drop in collection may have different circumstances in the monthly variation but the trend is an unequivocal symptom of problems in the economy, which are also being reflected in the data from the GDP and others.
The fall in collection is particularly due to the decrease in income from VAT (-5.2% year-on-year in August, -2.2% in the accumulated year), which is the main tax and accounts for 46% of the total. The collection of VAT It is an immediate reflection of the dynamics of the consumptionalthough the VAT It is more than just a sales tax. Indeed, it seems clear that consumption in real terms is declining, although the situation may vary depending on the sector and the marketing channel.
There is also a drop in collection of the tax business income (-12.2% year-on-year in August, -2.1% in the accumulated year-on-year). This is also a symptom of the problems that the economy is having, in this case from the point of view of business income, with margins that in many areas have shrunk or disappeared.
The tax that shows a positive dynamic is the Income Taxreflecting the increase in the real salary and in general household income; it rises 1.5% year-on-year and 3% in the accumulated annual period.
What are the explanations for this behavior of the collection? A factor that must be incorporated without a doubt is the effect of drought to the extent that it cut income exports in key sectors of the economy, such as agriculture and the cattle raising. These lower incomes directly and indirectly imply lower collections, due to lower production directly and lower demand for services attached to agribusiness.
The sector believes that the drought is over, but its effects have not yet been fully seen. There is also an obvious impact of the exchange rate asymmetry with Argentina, with tens of thousands of Uruguayans who cross the rivers every weekend to go to consume in the neighboring country. See estimates.
But there is a third element that increasingly seems to be at the root of the trends shown by various economic indicators, including the collection. We talk about the contractionary monetary policy that has been applied by the Central Bank of Uruguay (BCU)to lower the inflation. This objective is being met, but with consequences in terms of competitiveness and activity.
This, in reality, is not a singular discovery: in any economy in the world, large, small or medium, a strong contractionary monetary policy like the one applied in Uruguay to lower inflation, has consequences on activity and – therefore – on revenue.
In Uruguay, economy bimonetary, the effect tends to be more relevant through the exchange channel than through credit, but it is strong nonetheless. Finally, it is also possible that the economy is incorporating a less auspicious international situation than expected, with the economy of China with some problems, the same as Europe and – to a lesser extent – USA. The fact is that collection falls and – meanwhile – income remains the same or rises, raising the deficit. It is a yellow light on in an economy that will grow little this year and recover next year. Let’s hope that the collection.
Source: Ambito
