Bibliography
V. Conclusions
• Replace the ITAN with a true minimum tax; a broad-based income tax at a rate of 1 percent.
• It is extremely important to avoid new tax brackets and amnesties.
• Lower the threshold for electing to come under the Standardized Simplified System.
Subnational taxes
The regional governments are not responsible for collecting their own taxes.
Municipalities are responsible for collecting property taxes (on real property), vehicle taxes, and property transfer taxes (excise tax), in addition to other minor taxes. However, the tax rates and bases for these taxes are essentially set by national government regulations.
COMMENTS
The regional governments are supported by transfers from the central government, in particular those transfers granted discretionally under the budget. They are also financed by a share in certain tax revenues (basically fees and royalties) and certain nontax revenues.
On average municipalities receive more than 50 percent of their funding from transfers from the central government, including their share of certain tax revenues (the IPM, fees, and royalties).
POLICYOPTIONS
• Gradually reduce the vertical inequality among the government levels by assigning more responsibility for revenue collections to the subnational governments.
total fiscal pressure—that is, increasing the transfer of resources from the private sector to the public sector—can only be justified if expenditures of the national public sector are more efficient than those of the private sector. For this reason, any reforms of the tax sector would have to focus on the current lack of fairness and the distortions attrib-utable to the current tax structure. The lack of fairness is related to tax evasion and to the fact that few people are paying taxes. The distortions are due to exemptions.
The incoming administration could take advantage of the election mandate to adopt measures addressing these two issues. In particular, it would be desirable for the new administration to take the following steps, seeking broad congressional sup-port, during the first hundred days in office:
1. Approve measures for replacing revenues from the taxes being eliminated (ITAN and ITF). In this regard, it is proposed that the ITAN be replaced with a true minimum broad-based tax on assets that is deductible from the income tax, and that the ITF be replaced by a low tax on interest and capital gains.
2. Pass a provision at a very high legal level, with a broad consensus and com-mitment, which will not only reform existing tax exemptions but also, and more important, will limit the creation of new exemptions in the future or extensions of those now in existence.
3. At the same time, negotiations should be started aimed at eliminating regional exemptions, placing special importance on eliminating the fuel exemption (although it is recognized that this will probably have to be phased in gradually).
4. Approve a provision that that starts to close tariff disparities and that approves an explicit timetable for doing so.
5. Approve a provision that creates technical and transparency filters for intro-ducing and possibly enacting future amendments to the tax laws and regulations.
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