Another challenge that CIJUF believes must be overcome has to do with an “insufficient redistribution” of income from taxes on the part of the treasury. “Because of the way rates and withholdings are, people who earn more than the minimum non-taxable income end up earning less, in net terms. That is called horizontal inequality,” he lamented.
“Today, for every peso that someone living in poverty or extreme poverty receives in transfers, the tax system takes away more than one peso. So, in net effect, purely monetary, on average poor households end up losing out to the tax authorities,” argued John Scott, advisor and academic researcher at Coneval.
“That doesn’t mean not having consumption taxes; It means spending effectively to compensate poor households,” he added.
He explained that if a poor household is taxed, like gasoline, and that resource is used for the contributory pension system, “what has grown the most in public spending is that the poor are financing spending for the non-poor, and that is unacceptable.”
Regarding spending, he considered that public finances must be effective and efficient at all levels.
In this regard, the commission’s specialists recommend “eliminating tax exemptions,” that is, tax exemptions, as well as reviewing and strengthening property taxes – land tax and ownership -, especially at the local level; and how to use environmental taxes, explained Nora Lustig.
Another aspect to review, he added, has to do with taxes on wealth, particularly on inheritances.
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