The government is proceeding with tax reform and is considering monotax reform as one of its major measures. This would be consistent with the government’s objective of widening the tax base.
Labor reform is already being discussed between parliament and the government, but the government is negotiating tax reform based on seven keys, which the government expects will be the most difficult of the reforms to be submitted to parliament from December 10 next year.
As has become clear in recent hours, one of the alternatives under negotiation is a modification of the monotax to proceed with the scheme already working in Spain.
in 2.794 million independent workers were registered in Augustbetween monopolists and the self-employed. Furthermore, the government had already abolished the social monotax, which meant the withdrawal of approximately 390,000 workers from regular employment.
One of the Government’s intentions is to reduce the scope of the tax, which consists of a single tax, which means the burden of collection is significantly lower than that of registered private workers or registered responsible persons. The latter enters the world of taxpayers who have higher contributions and pay profit and value added tax (both joint participation taxes).
Economy Minister Luis Caputo expected that reductions in employer contributions and contributions would be considered with the option of moving into retirement plans, but did not elaborate further on this point.
This amendment will be introduced in the tax reform. One reason for this is that labor reform is undergoing extensive negotiations with the CGT, with new labor systems being considered, as well as reductions in contributions to unions.
This tax is estimated to be the most difficult to pass. This will also involve the governor, whose collection is likely to be affected by reducing some taxes. Sources familiar with labor and tax reform negotiations asserted that tax reform is at issue.
One of the changes that will replace Monotax is They will enter through labor reform. This is a diagram based on Spanish tradeis understood as a financially dependent self-employed person who receives at least 75% of his income from one customer, but who has the same rights as a self-employed person.
Abolishing monotax completely is part of a more complex discussion. “Abolishing the monotax will increase pressure on everyone to be kicked out of the system” warned tax lawyer Diego Fraga.
As he explained, the system currently covers three taxes: VAT, profits and social security. “Abolishing the monotax will not only increase your income tax burden, but you will also start paying income tax amounting to 35%. That’s much higher than what you’d pay as a monopolist”.
VAT will be added to this. VAT must be passed on to the client’s costs when the service is provided to the final consumer. Furthermore, he warned:In this day and age, the worst thing you can do is become self-employed. This is because, in addition to the higher tax burden, much higher withholding and recognition apply. This means that you can be forced to pay taxes in advance that you don’t have to pay later. ”
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