THE NEW TAX REFORM

By: Felipe Argote

Among the economic trends are a number of trends and opinions as the on the same legal concept. Among economists there are so many different currents that is a myth to say that we can group them without anyone bothering to be in a segment with someone who does not approach its design. By contrast there are matrices or better as Tim Berners-Lee would say a web of ideas that intersect in some respects. The go as asymptotes and then away again in other elements of analysis. What can never be doubted, even among the historicist, much less between the marginalists, who adhere to a more algebraic approach to the economy, is equality between the two sides of an equation. The properties of equality states that if each side of an equation is added or subtracted an equal number, equality holds. Contrarius Censu, if a part of equality is added a number and the other remains the same, it destroys the equality of the equation. This may be not be economics but algebra, but serves to explain that if we have a balanced budget but we hope to increase revenues by 200 million dollars, to keep the budget balanced is impossible to reduce the sources of revenue without a replacement income decline plus the 200 million dollars.

While we can not say that tax reforms that will come to be discussed in January next year is not the best kept secret, cannot be said categorically that anyone knows the entire document. Least one could argue that their guidelines will be the end of the fiscal reform, given the pounding of the chief executive may, as it did with the Credentials Committee appointed by him to evaluate candidates for Judges of the Supreme Court, claim that does not like any of the measures proposed by the consulting firm McKinsey & Co. With the difference that the consulting firm based in Washington that says is proud to serve the 70% of the companies listed in Fortune magazine will charge $2.5 million for their advice, unlike the commission of credentials that is ad honorem.

Some, however, those who have had access to the proposal, all close to the government, speak beauties of the document. Let's see. The former president of the Chamber of Commerce José Rivera rescues from the document a key element: Try that taxpayers, both individuals and businesses, see their tax rate reduced. Okay. If both natural and legal person will see their taxes reduced, and also will be recovered at least 100 million more as said the Minister of economy Vallarino, or 200 million as discussed among the most optimistic (or should I say pessimistic). To this is added that according to vice Economics Minister Frank de Lima, employees earning less than B/3,000 per month will pay 80 million less and who earns more than that number and pay 27% will be now lowered to 22% as the corporate rate. We may well be talking about another 200 million. It is highly unlikely that any difference is paid by the rise of banking. Impossible. If the banks now pays about B/47 million and is said to increase its contribution by 50% that is less than B/25 million more. Then it comes the declarations of the president of the republic Ricardo Martinelli who denies any possibility of raising the consumption tax or ITBMS, liquor and beer. Good news for the vice president.

Previously in the 2009 budget presentation gave some contradictory trends in our opinion on the variables that underlie it. For example it suggests that in 2010 that unemployment will fall by 1.5% while growth will be 3.5% in GDP. If in 2008 compared to the year immediately preceding the unemployment rate fell by just over one percentage point under pressure from economic growth above eight percent, how it intends to reduce the level of unemployment at 1.5% in 2010 to expected growth of only 3.5% being optimistic. Moreover, this is estimated to be accompanied by a reduction of more than 5 percentage points in the inflation rate. If this is possible then we have to establish three hypotheses

1. We must review the properties of the equation, including Baldor's algebra.

2. There are other non-recurring revenues that the government has saved with great zeal.

3. There will be a tax increase, most likely with an emphasis on consumption taxes to be paid by all Panamanians.

If the third hypothesis is fulfilled and I would like to be wrong, what we save in a pocket we're going to pay it with the other and a little more. How much more? Well, how about 200 millions ?