After months of negotiation, the Ministry of Finance sent the political parties a draft with the proposals of the so-called “Pact for economic growth, social progress and fiscal responsibility.”
Considering the criticism of the tax reform project presented in 2022, which determined the rejection of even the idea of legislating, the Pact moves away from the idea of a comprehensive reform of our income tax system, as well as the creation of new taxes, and focuses on improving the efficiency and effectiveness of the current system.
In this way, the Pact mainly includes measures to modernize the functioning of tax authorities (IRS, Customs and TTAs), reduce spaces for avoidance and evasion, combat informality and encourage investment and productivity. On the other hand, it is categorically stated that the Government will not insist on emblematic proposals such as the wealth tax and the tax on retained earnings.
Regarding Income Tax, the Pact proposes to reduce the rate of the First Category Tax, in order to bring it closer to the median of OECD countries, and to focus the increases in taxes on the income of people with higher incomes. Likewise, it is proposed to include investment incentive measures, such as semi-instantaneous depreciation. For SMEs, the creation of an ultra-simplified system is proposed, through the payment of a monotax that covers tax and pension obligations.
Among other measures, they also highlight the temporary reduction, for a period of 2 years, of the Stamp Tax, for investment financing operations and the inclusion of a regularization program for undeclared capital held abroad.
The Pact also incorporates some measures similar to those already proposed in the 2022 reform project, including the creation of the figure of the Anonymous Tax Complainant, adjustments to the Export VAT refund regime and elimination of tax exemptions. In terms of procedure for the application of the General Anti-Avoidance Standard, the delivery of its definition (administrative or judicial headquarters) to the legislative discussion stands out.
The content and definitive scope of the tax measures included in the draft Pact should be known in March 2024, when the Government presents the respective reform project.
To read the complete draft proposed, click here
