Uruguay Increasing Taxes To Tackle Deficit, Says IMF

by Mike Godfrey, Tax-News.com, Washington

02 February 2017

Uruguay's decision to hike income tax on middle- to high-income earners will support plans to reduce the fiscal deficit to 2.5 percent of gross domestic product (GDP) by 2019, says the International Monetary Fund.

The IMF said the 2017 tax package is expected to have "a limited adverse effect on consumption," with an increase in personal income tax rates for middle-to-high-income earners partly offset by lower VAT rates for electronic payments.

According to the IMF, authorities in Uruguay have demonstrated a clear commitment to putting public finances back on track.

It said: "The widening of the fiscal deficit in 2016 was a helpful response to moderate the sharper-than-expected slowdown. At the same time, the Government has locked in tax increases for 2017, sustaining its commitment to bring the fiscal deficit to 2.5 percent of GDP by 2019 which is projected to put debt on a downward trajectory. The fiscal consolidation effort is essential to safeguard Uruguay's hard-won credibility with international investors and face the longterm fiscal challenges of population aging."

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