President Carlos Alvarado defended the 2% tax to be imposed on the products of the basic basket before the National Restoration (RN) fraction.
Some of the most important changes of the bill for the Strengthening of Public Finances is the removal of these products from Value added tax (VAT). The basic basket consists of a group of 200 products consumed by people with lower incomes, such as rice, beans, eggs, and potatoes. The last time it was updated was in 2012.
Currently, the basic basket is exempt, that is, it does not pay taxes, neither in the consumption, not in the production end, and the services used in the latter, almost none have sales tax because services are not currently taxed.
Why does the Treasury say that it is harmful not to impose the tax? According to this portfolio, it’s ultimately more harmful for consumers not to impose the 2% tax over the entire production chain.
For example, when an industrialist buys wheat to make flour, they pay the tribute on the price of wheat. When they sell the flour, they charge the baker a tax on the price. When the industrialist collects the tax, he leaves what he paid and the rest goes to the Treasury.
When the products of the basic basket are exempt from VAT, the producer pays the tribute in the whole chain (in this example on wheat and on flour) but they cannot charge it to the final consumer (on bread) then the costs increase.
In view of the increase in costs, the entrepreneur must reduce their profit margin or increase the price to the consumer.
According to the Treasury and President Alvarado, not imposing this tax would favor evasion and leave open the possibility for the prices of products to be set arbitrarily.
Alvarado said that his government will continue negotiating with the legislative fractions and will continue defending the elements that his administration deems necessary so that the fiscal plan is “progressive” and resolves the fiscal deficit.
In addition to being against the 2 % tax on VAT for the products of the basic basket, the fraction of RN requires the government to reverse other taxes included in the plan, such as the 4% on medicines, health services, and private education.