Tax reform, 2018 budget pass into law after gov't secures solid Senate majorities
The government forecasts an overall economic growth rate in 2018 of 3.5 percent, a 12-percent increase in investment, annual inflation of 15.7 percent, a 3.3-percent increase in household consumption, and a 17.1-percent tax over GPD ratio.
The reform will reduce the income tax rate on undistributed dividends from 35 percent to 25 percent by 2021, and implement a 15-percent tax on financial assets in foreign currencies or indexed to inflation and a 25-percent tax on undistributed corporate profits.
The package will also see employer contributions fall over five years. By 2022, employers will only start paying contributions when an employee’s gross income surpasses 12,000 pesos per month (which will be adjusted to inflation).
Meanwhile, beverage taxes will rise from 20 to 26 percent and taxes on beers from 8 to 14 percent, excluding craft beer.
The 2018 national budget passed the Senate in a similar fashion, with 54 votes in favour and 14 against.
In it, the government has forecast an overall economic growth rate in 2018 of 3.5 percent, a 12-percent increase in investment, annual inflation of 15.7 percent, a 3.3-percent increase in household consumption, and a 17.1-percent tax over GPD ratio.
As the dollar creeped toward 19 pesos on Wednesday, the government estimates an annual rate of 19.3 pesos in 2018.
Also laid out in the budget: an estimated 19-percent increase in income, a 14.8-percent rise in primary expenditure, and a 17.2-percent increase in capital expenditure.
Social benefits composed the most significant increase for any one expense item within the Budget’s primary expenditure, with a 22.1-percent increase in spending from 2017 to 1.5 billion pesos (US$83.5 million).
The government has also set aside 435 billion pesos (US$23 billion) for 61 public works projects in 2018. Representing 3.5 percent of GDP, these project are part of a Private-public Participation (PPP) scheme valued at US$30 billion.
DEBITS TAX LAW
Finally, the Senate passed an extension to the Debits Tax Law which sees taxes on bank transactions directed to the country’s welfare system.