A study by the Inter-American Center of Tax Administrations recorded the shortcomings in the collection of these taxes.
The General Tax Directorate (DGI) could raise approximately double what it currently collects in Value Added Tax (VAT) and of Income Tax on Economic Activity (IRAE)two fiscal “pillars” in the tax structure of Uruguay.
Uruguayan “collection efficiency” leaves a lot to be desired according to the study carried out by Fernando Peláez, official of the DGI, published in a recent working paper of the Inter-American Center of Tax Administrations (CIAT). The most obvious example of this “inefficiency” is that the official local collection agency receives around 41% less in VAT and 54% in IRAE than what it could charge.
The calculation corresponds to the period 2019 – 2021, and is based on the differential between the fundraising potential possible for a tax and what was actually collected. That is, the “collection gap,” according to the weekly Busqueda. This differential, in turn, is divided into two: the “political gap” —associated with preferential treatment, which includes exemptions, simplified regimes, tax benefits, extraordinary deductions, etc.— and the “noncompliance gap”which has nothing to do with evasion.
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The “collection inefficiency” of Uruguay
According to Peláez, the collection efficiency of the VAT in Uruguay It was 59% between 2019 and 2021, above the regional average which indicated an average of 55.3%. Within the 41% that DGI they lost payment, 19% was explained by resignation validated by political decision – in the region it was 18% -; while another 22% was due to non-compliance —26.1% in the general considerations of the 18 countries included in the study.
As for the IRAE, efficiency was 46%, also above the 46.9% at the regional level. The collection inefficiency, in this case, was explained by 18% of tax expenditure—from policies such as Promoted Housing, that establishes exemptions for the construction of real estate; and of investment promotionwhich offers tax benefits for companies in free trade zone- and 36% due to non-compliance. The averages among the countries studied were 10.9% and 46.9%, respectively.
It should be noted that the triennium includes the impacts generated by the Covid-19 pandemic in 2020 and 2021, especially in terms of consumption, economic activity and, particularly, tax relief measures implemented during the crisis of those years.
Source: Ambito
