Monday, July 02, 2007

The Tax-man Uruguay

What? I almost forgot some really big Uruguay News. Of course, not being total political nincompoops (sp?) the Uruguayan politicos lowered the VAT a "trifle" on some goods FIRST as a tradeoff for collecting an income tax.

One of the really nice things about being an Uruguayan citizen and resident - no personal income tax - is going away. It promises to encourage more gray-market activities, compliance headaches (especially for the small entrepreneurial business person) and expensive and complicated machination to avoid income taxes by many....

In case you are wondering "what kind of complicated machinations, fuBarrio?", have a look at some of the links on my sidebar.

Of course, the company I work for is licensed in Uruguay to deal with foreigners money, and as such, are precluded from taking on Uruguayans as clients.

Don't know if any studies have been done on this, but it seems that a quasi-socialist state like Uruguay attempts to level the playing field....But in order to do so, they believe, requires taxing income of ordinary working citizens.

Therefore, the very smart, wily, rich (enough to afford good tax advice), and of course the unscrupulous who just ignore or break the law, aren't effected. The "law abiding" middle class that hasn't enough money to pay for good/expensive advice and offshore vehicles pays a majority of the tax burden. The end result is a group of very wealthy tax avoiders who take more from the public trough -- which manifests itself in the form of access and political or economic "favors", and a bunch of formerly middle class citizens wonderin why it's harder and harder to keep up.

So in the end, perhaps the attempt at providing a social saftety net for the poorest of the poor creates a bifurcated social strata where only the super rich and the strugglin to pretend they are middle class survive.

Sound like any other countries we know?


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