Authors: Alexandra Ortiz
The new tax regulations to promote entrepreneurs must promote formality and a tax-paying culture, but they must also adapt to the tax-paying capacity of entrepreneurs, which will foster the generation of employment and the economy’s reactivation from the bottom up.
During the last years, new undertakings also known as “startups”, have come under the limelight because they consist of innovative and revolutionary ideas whose aim is to launch a business within the market of Information and Communication Technologies.
Notwithstanding this, from our standpoint and vision, a startup is also: i) the neighborhood store that wants to open a micro market, ii) the auto repair shop that wants to offer a more sophisticated service iii) a person who has the “know how” to develop an innovative application that involves science and technology, or also iv) a group of persons that want to reinvent the provision of services with innovative ideas.
Thus, in order for entrepreneurs to enter a highly competitive business world, they require a diversity of incentives, public, and private efforts as well as regulations that will allow them to start-up.
During the quarantine, the new regulations have focused on creating programs to support micro, small and medium size companies, however, these incentives and support schemes do not reach entrepreneurs, who are not part of the corporate network, given that they are in a previous stage, at the beginning, starting up their businesses that still lack regulation.
The absence of a specific regime, leads entrepreneurs, at the beginning of their projects, to become forced to comply with regulations designed for companies with a higher capital and revenues, which, in terms of tax issues, for example, sets forth two problems: (1) That entrepreneurs opt for initiating informal businesses so as to avoid regulatory and tax burdens imposed on them, or; (2) That the entrepreneurs establish their businesses assuming tax burdens that are not applicable to their tax-paying capacity, which could seriously limit their growth or in the worst case scenario, lead them to fail.
Within the preceding context, it is necessary that, after the quarantine, new policies and measures are promoted, especially with respect to taxes, focused on reactivating our economy and strengthening the corporate network, through regulations designed for entrepreneurs.
This type of tax regulations, must be characterized by their flexibility, user friendliness and must be adequate for the entrepreneurs’ tax-paying capacity, which will allow them to be competitive, while the State promotes their formality, generating an ambitious tax-paying culture, that will lead them to become the large taxpayers of tomorrow.
Taking into account the above, this new tax regime for entrepreneurs must be of an intermediate nature, with a temporary scope and sustained by four (4) pillars:
1. It must promote formality, through tax measures that foster the consumption of products and services furnished by local entrepreneurs and entice large companies to include them in their productive chains.
2. It must promote a tax-paying culture, focused on realizing that today’s entrepreneurs, will become the large taxpayers (Gracos for its Spanish acronym) of tomorrow, which can be attained solely through formality and compliance with accessible tax obligations that are adequate to their tax-paying capacity.
3. It must adapt to the tax-paying capacity, given that it is not reasonable to compare the taxpayers included in the General Regime with the entrepreneurs or, for the other part, entrepreneurs cannot be “stuck” under the Simplified Tax Regime if the idea is to evolve, grow and contribute to our economy.
4. It must promote the generation of jobs, with the aim of reactivating the economy from the bottom up as an economic measure post quarantine.