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IMF Praises Uruguayan Tax Reforms

by Mike Godfrey,, Washington

14 December 2016

Economic activity in Uruguay should remain stable despite an increase in tax on middle-income taxpayers, the International Monetary Fund said.

A new report from the IMF on Uruguayan policies said that a proposed increase in personal income tax for middle-to-high earners next year would be partly offset by lower value-added tax rates for electronic payments. It praised the measure, noting that the redistribution of income taxes will bolster low wages and improve income equality.

In June, Uruguay announced that it would increase personal income and social security taxes in 2017 under its fiscal consolidation plans.

Under the changes, income of up to UYU23,380 (USD817) would continue to be taxed at zero percent, and income from UYU23,380 to UYU33,400 at 10 percent. However, there will be a three percent increase in the tax rate for the next three brackets (for income up to UYU167,000), and a four percent increase for the final three brackets, meaning that the top rate of income tax will rise to 34 percent from 30 percent on income exceeding UYU384,100.

Social security tax rates will also rise, by three percent to 23 percent for those earning more than UYU50,100 per month, and by four percent to 29 percent for those earning above UYU167,000 monthly.

TAGS: VAT rates | tax | Uruguay | social security | tax reform | individual income tax

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