The complex tax situation of Uruguay It is an issue that is not only at the center of the political debate table between authorities and parties, but also a main topic of research by analysts, who are looking for alternatives to accommodate public accounts without this having a direct negative impact on citizens. deficit elevated, the impossibility of going up taxes and the need to improve the competitiveness of the country, what alternatives arise?
From this scenario, researchers from the Center for Studies of Economic and Social Reality (Ceres) They put the spotlight on the public spending, particularly in the need to analyze it in order to make use of the public money more efficient and effective to be able to invest in the areas necessary for the national development, without this meaning an increase in the tax pressure on the population or raise the levels of debt already tall.
Ambit spoke with the economist Florence Betancor, Ceres Research Coordinator, on the process, the results and some issues arising from the final document called “The transformation of public spending in Uruguay”.
Why did you focus your analysis on public spending in the first place?
– The origin was this dilemma that the country faces that, on the one hand, it needs more public investment in key areas for development and where it is lagging; but, on the other hand, there is no fiscal space for increases. All this raises the situation that we cannot afford not to be spending in the best way, and there is the need for spend more efficiently and effectively. That is why we propose the need to develop a plan to transform public spending.
How was the development process of this transformation plan?
– What we did was do a search for the international practices, Because there is a reality that it is a challenge that countries often face. We use the best international practices in this regard and the final conclusion we reached is that Uruguay has a methodology of budgeting which follows a different logic to that of these countries, because it allocates a budget by organization instead of a budget by result. In this sense, an improvement to work on in the long term is to carry out the performance-based spending of the area, but in the meantime progress can continue in other areas.
For example, in a general, exhaustive, constant and professional review of expenditure, which is another practice that these countries that we analyzed do, to identify efficiency improvements in areas. In our case, due to the challenges presented by the amount of information between the different agencies, we developed a model of Artificial Intelligence (AI) to address the tasks, objectives and other matters of the bodies of the Central government.
This is how we identified different levels of institutional fragmentation, That is, organizations and areas that have the same tasks or relevant topics such as Housing, Early Childhood either Investigation and development which are spread across different entities and, consequently, imply inefficiencies in spending. Reducing this fragmentation would then be the most immediate way forward.
One of the issues that emerges from the report is that in many areas analysed, spending is higher on personnel than on investment. What impact would an improvement in institutional fragmentation have in terms of employment?
– The solution to fragmentation is not necessarily to eliminate offices or programs. That may be the best option in some cases. We take the initial step of identifying certain areas, but then we have to see the effect that this is having and what are the best options among those that are handled to solve it. Sometimes it is to improve the coordination, reorganize staff to focus more on one side or the other, or consolidate programs.
Developed countries also have a strong component of public employment of the total workforce, so I’m not saying that our numbers are high and that we need to cut back, but that there is something to analyze later in detail. More personnel perhaps means that more investment is needed, not necessarily fewer jobs. The idea is to complement and be able to use all the information, to put it on the table in election year so that the next government can take all these issues into account.
In this scenario that you describe as a starting point, how does a possible approval of the PIT-CNT plebiscite influence, on the one hand, and the adjustment in the government’s fiscal projections, on the other?
– It is a fact that the plebiscite It would be a great difficulty or would further aggravate the fiscal situation. This was not included in the analysis because it is a current situation, but we talked about the fact that we are on a path towards development and taking certain steps to promote it even more; and if the plebiscite were approved it would be a kind of recoil on that path that has been advancing regardless of the political party that governs.
As for the goal settingis part of how the system is designed. In any case, the country has been implementing certain improvements in terms of strengthening fiscal sustainability in the last two decades. Although we still have a long way to go and we must aim to improve, progress has been made and improved in several ways, and it is good that this is recognized and complemented by other advances that other countries in the region have taken into account.
Speaking of other countries in the region, Argentina is also undergoing a process of transformation of the State and public spending. Do you see any similarities between this process and the one Uruguay needs?
– There are certain issues that are not so much on the table in Uruguay, and this is a starting point to take them into account. Without a doubt, it is not in the imagination a restructures like the one that went through Argentina, but yes in matters at a micro level. For example, one area that we have been analyzing is that of support for SMEswhich is often said to be insufficient. We identified 11 entities linked but disaggregated, which causes responsibilities to be diluted or the allocation of funds to not be coordinated in the best way. We aim for better coordination, for a national plan that will allow us to advance in certain issues that we are currently lacking. It is not about eliminating a ministry.
Source: Ambito
