Uruguay is committed to lowering taxes to generate “greater consumption and economic dynamism,” a measure announced this week by the country’s president, Luis Lacalle Pou, which drew criticism from the left-wing opposition.
“We are in a position to proceed with a tax cut. Tax cuts, especially for those people who make great efforts to support themselves financially and who generally do not have full support from the State because they are not in a vulnerable situation,” said Lacalle Pou, leader of the National (or White) Party, head of a government coalition that can be classified as social-liberal.
The 49-year-old president announced reductions in Personal Income Tax (IRPF) and Social Security Assistance Tax (IASS). In a country of barely 3.2 million inhabitants, the benefit reaches 83,000 taxpayers, 20,000 of them pensioners.
The opposition of the Broad Front, which governed the country for three consecutive terms between 2005 and 2020, described the measure as “electoralist” and pointed out that it does not benefit “those who have less.” The next presidential elections in Uruguay will be at the end of 2024.
Lacalle Pou, who is at his lowest moment of popularity, but still has 40% approval for his management, which began three years ago, responded ironically to the left-wing opposition: “It is the first time in history that there are people complaining that taxes are being lowered”. “Do you remember María Elena Walsh? It’s the world upside down,” he added, referring to a popular Argentine children’s song.
The Uruguayan president specified that the tax relief for individuals and companies means 150 million dollars less for the state coffers. “The tax cut will be focused on increasing people’s disposable income” and “deepening support for micro and small businesses,” he added.
In addition to increasing the personal income tax deduction from ten to 14%, Lacalle Pou announced that the deduction for dependent children will be increased and the duplication in the case of children with disabilities will be maintained. Uruguay is a country that has recently lost its population and is facing a structural demographic problem: aging.
The governments of the Broad Front closed in March 2020 with a fiscal deficit of 5% of the Gross Domestic Product (GDP), a figure that grew to 6.1 during the Covid pandemic and dropped this year to 3.4%.
Lacalle Pou, son of former president Luis Alberto Lacalle Herrera (1990-1995), has been insisting on the need to open up the country’s economy and associate Uruguay with large trade blocs, something that has caused serious friction in Mercosur, especially with Argentina and Brazil.
The Uruguayan government is also promoting the establishment of foreign companies and citizens, especially in the Punta del Este resort area, to boost the economy and stop the drop in the birth rate.
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