Retirements and Earnings: the violation of the fiscal golden rule in the most burdensome country in the world

Retirements and Earnings: the violation of the fiscal golden rule in the most burdensome country in the world
Retirements and Earnings: the violation of the fiscal golden rule in the most burdensome country in the world

The Senate’s rejection of the reestablishment of the Income Tax for employees and the half sanction of Deputies to the new retirement formula have something in common: the violation of “Fiscal Golden Rule” why there should be no public spending without its genuine source of financing.

At Lógica we maintain that the lack of fiscal culture transversal to our entire society is one of the main causes of the economic tragedy, with the highest taxes and inflation in the world, a reflection of excess public spending, doubled in the last two decades. Our citizens are in the last fiscal position in the world because of a regime that has hidden taxes from them; a business sector that has not included the tax issue on the agenda; a judicial power that has not placed limits on the fiscal voracity of the three levels of government; and, at the top, a political power that has led this lack of fiscal culture in the legislative and executive with the common pattern of the systematic violation of said Fiscal Golden Rule.

Let’s imagine the following dialogue between the legislator and the Argentine citizen in the last two decades, selecting here only 3 among a hundred similar questions:

  • Legislator: Do you agree to open 10 free public universities?
  • Citizen: Yes, of course, university education is essential for the development of the country.
  • Legislator: And in that Argentines who did not make their pension contributions have a minimum retirement?
  • Citizen: Yes, naturally, we have to be supportive, otherwise they would not be able to survive.
  • Legislator: And what about repealing the income tax for the vast majority of employees?
  • Citizen: Very agree, salary is not profit, more money for all Argentines.
  • Legislator: Now, do you agree that to face all of the above you have to bear 50% taxes when consuming, that is, you buy one product for yourself and another for the State and that, in addition, because it is not enough, have to issue with inflation exceeding 200% annually?
  • Citizen: No way! Give me the list of 100 questions and I will answer them one by one.

The origin of the Argentine fiscal tragedy has not been in the proposals made from politics but rather in the fact that they were presented incompletely. The last question and answer capture the Fiscal Golden Rule. An expense is not admitted if there is no genuine source that finances it, be it a tax or the reduction of another expense. It is the rule applied in our house and family. We only incur such an expense if we increase our salary, or lower that expense, or sell that good. And be very careful if we get into debt.

But that very natural rule was violated time and again by a political leadership that needed a regime that systematically hid taxes to give free rein to all types of political and social projects, without civil society paying attention to how to finance them. . This caused the Argentine’s total disconnection with any fiscal issue, being functional to the economic tragedy. The other side of populist politics is a fiscally naive. But not by nature, but because the regime made it that way.

Something like if the bank hid our credit card statement from us for decades, encouraging us to incur all expenses that satisfied our needs, desires and whims. Until one day we found out that reality foreclosed on us and we were left on the street.

There are countries in which the Fiscal Golden Rule It is inserted at the heart of its tax regime. For example, the Basic Law of Germany provides that the federal budget must be balanced without structural deficits and that expenses must be financed entirely with income generated by the Federal Treasury.

In Switzerland and Sweden there is also a Fiscal Golden Rule which applies so that any increase in public spending is financed with additional income or cuts from other programs.

Closer, Chili This rule not only applies to the general budget but also to each specific expense. The Constitution provides that Congress may not approve any new expenditure from the Nation’s funds without indicating, at the same time, the sources of resources necessary to meet said expenditure. If the resources provided by Congress are insufficient to finance any new expenses that are approved, the President must proportionally reduce all expenses, regardless of their nature. Furthermore, the The Constitutional Court has defended the Chilean fiscal rule in different rulings.

In Argentinathe deputy Silvia Lospennato and others from his block presented a project to modify the Regulations of the Chamber of Deputies by which “Every matter that contains the disbursement of expenses must indicate an estimate of the same as well as the source of financing.” Excellent initiative. But the Fiscal Golden Rule It must be inserted into the heart of our legislative system, for example in the Financial Administration Law. In addition, it could be put in the queue of amendments in a future constitutional reform.

With the Fiscal Golden Rule general and specific there would be no place for “small money plans”, such as the non-application of income tax for the vast majority of employees and the refund of VAT for purchases, which were irresponsibly promoted, for electoral purposes, by the previous ruling party, with the support of the current president. The twists and turns of life, restoring profits became one of the main “stones in the shoe” of the fiscal package. There would also be no room for retirement formulas that unbalance the budget. Because the way to finance the increase resulting from said formula should be sanctioned in the same law. If not, the law does not come out.

From Lógica we will promote the Fiscal Golden Rule for the three levels of government, with application to the general budget (already announced on different occasions by the president at the national level, in the German style) and also to each specific expense that is sanctioned (Chilean model), with the conviction that this norm It will be key to generating fiscal culture and logic in our legislators. With the clarification that fiscal balance is a necessary but not sufficient condition.

Argentina having come to have the highest taxes and inflation in the world, a reflection of excessive public spending over the last two decades, The Fiscal Golden Rule can only be fulfilled by bringing taxes and expenses down. We will only have a logical country when we have logical expenses and taxes.

President of Lógica, an NGO dedicated to generating tax awareness throughout society.

Source: Ambito

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