The new government will have to promote tax reforms

The future government will have to promote strategies aimed at curbing public spending and raising more revenues, in order to face the problem that the current government will face with the 2024 budget.

In this sense, the economist, René Bracho, explains that the main challenge observed in both the new and the outgoing administration is related to the need to increase revenues in order to cover expenditures, because in order to meet payments to state suppliers and to meet other financial obligations that the state has , it is necessary to have these revenues and liquidity.

“For this, it is most likely that, in the case of the current Government, they will try to distribute these funds in the most efficient way, and in the case of the future Government, next year, they will have to calibrate the possibility of implementing tax reform, not only in the tax or tax aspect, but also in other processes related to revenue collection”, says Bracho.

He believes that it is necessary to establish collection management, that is, to improve the collection management of the state, to revise part of the tax collection for technological platforms, to implement the efficiency of many operations, to achieve savings and efficiency, “this is a challenge that must be taken into account every time some development projects are lost engines that were available or thought to be available and everything looks like we won’t have.

The economist points out that: “we are obliged to take measures as a nation with national debates, in order to create the national maturity necessary to implement all these changes. I think it is important that as a country we dedicate ourselves to the disposition for conversation and the readiness for democratic debate in order to bring about the correct and appropriate decisions and also implemented those changes.

In the meantime, the former president of the College of Economists, Olmedo Estrada, states that it is a very complicated situation, because you only need to take references from this year, where it can be seen from the realized deficit that the income was not enough to cover only 27 billion, that was what was proposed for 2023, next year will be more difficult because there is no mining, the Panama Canal has to make some transit adjustments and it is an election year.

“We will not have the revenue to cover the budget. I believe that nothing more than these three considerations lead you to think that we will not have enough capacity to raise $30 billion and that we will generate more deficits in which we will again have to resort to financing and getting money through bonds that borrow state and increase the public debt, in short this is the reality that is presented at the moment, it is difficult”, explains Estrada.

The expert emphasizes that when the government comes, it will be seen what strategies it implements, and one of them could be curbing public spending. “It is possible that whoever gets to say, let’s go to an audit that was not done in Nito’s government and an audit of subsidies that must be canceled, budget items that were given to the Assembly, the Decentralization Fund, other ministries that they really don’t have to increase the budget, so it remains for them to take these measures if they want to end the year without budget problems”, he points out.

Last Monday, December 18, the Council of Government approved changes to the proposal of the Law on the General State Budget for the fiscal year 2024, which was presented to the State Assembly in July 2023.

The Minister of Economy and Finance, Héctor Alexander, announced that the budget rebalancing project for 2024 amounts to 30,690.4 million dollars. The increase in the 2024 budget, compared to the modified 2023 budget, is $1,808.1 million or 6.2%.

Carlos González, Deputy Minister of Economy, explained that the 2024 budget includes the construction of a new oncology hospital in phase 1 and the Metetí Hospital, Darién.

Compared to the 2024 budget presented to the National Assembly in July 2023 of $32,754.5 million, the adjusted 2024 budget of $30,690.4 million is reduced by $2,064.2 million.

According to Alexander, spending for the education sector increases by $1,240.8 million, moving from 5.5% to 7% of GDP (an increase of 1.5%), as established by Law 362 of February 2, 2023, which distributes investments in the education sector.

For its part, debt servicing grows by $1,100.4 million. Both increases, combined, are greater than the increase in the 2024 budget ($1,808.1 million) compared to the modified 2023 budget. That is, without these increases, the modified 2024 budget would be lower than the current 2023 budget ., said Minister Aleksandar.

The 2024 budget excludes the digital voucher, the fuel subsidy, as well as the abolition of some subsidies and benefits for officials.