Another challenge that the CIJUF considers that must be overcome has to do with an “insufficiency in the redistribution” of the income that comes from taxes, on the part of the treasury. “Because of the way the rates and withholdings are, people who earn something above the minimum non-taxable income end up earning, in net terms, less. 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 that sense, the commission’s specialists recommend “eliminating the collection waiver”, that is, tax exemptions, as well as reviewing and strengthening property taxes – property and tenure -, especially at the local level; and how to use environmental taxes, detailed Nora Lustig.
Another aspect to review, he added, has to do with taxes on wealth, particularly on inheritances.
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