Generalize the VAT to 16 % would be the salvation of public finances

» Generalize the VAT to 16 % would be the salvation of public finances

It is an alternative to mitigate negative effects that hit economy, and that would encourage formality, generate employment and GDP growth would increase.

Instability in public finances that led to the fall in oil price could be solved if government took the decision to implement a "draconian " measure in which generalized the Value Added Tax (VAT) to 16 % in all areas; ie taxing consumption pose specialists.

According to the Intelligence Unit of The Economist, if generalized VAT at 16 %, additional resources 195,779.8; million pesos would be obtained. This scenario includes taxing food and medicine.

This scheme reflects a figure that is equivalent to cut 135,000 million pesos that Ministry of Finance announced in 2016 Pre- criteria Economic Policy, and economy would have surpluses for more than 60,000 million pesos.

"Such scenario would not be fatalistic, as government coffers have surpluses, which would allow longer make spending cuts and decrease play areas to maintain social and economic stability ", analysts agree.

Based on simulator's results, another option that has government is turn up one point to VAT rate (as it is now, that is, without taxing consumption), but with that only would be obtained 33374.2 million pesos, and if it be raised to 18 % resources would add 79785.9 million pesos.

Gabriel Perez, professor at the Universidad Panamericana (UP), said that given the new budget- generalize VAT in 2016 would not be half that unleashes greater social unrest.

The secret, he said, is to explain to society that this hurtling tax evasion. He further argued that it is feasible and can be sold this fiscal policy, as the government has to achieve political operators.

"They should not let time pass, nor do it gradually, it has to be once and for all to have a positive effect. Economy has yet to recover, consumption is collapsed and social needs forced to make this decision", he said.

Under this scenario, analysts insist that if has already taken the decision to conduct a zero-based budgeting to ensure it will not achieve enhanced to 100 % in September, and a cut in public spending are made, it's time you change tax reform prior to delivery of the 2016 economic package.



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