Week 09

ESSAY - My Experience With Taxes

Taxes, corruption, carbon footprint, and Universal Basic Income.

By Pablo Zuloaga Betancourt

I remember the first time I heard about taxes, it was in my first visit to the USA when I was paying for something that in the beginning was supposed to be cheaper, but when I got into the cashier, there was an extra charge. I didn't understand what it was since I was only a 13 years old kid, so I thought it was a scam. 

Then, a few years later I remember in Colombia a campaign against TAX (IVA – Impuesto de Valor Agregado) evasion, which invited people to ask for the receipt in every shop they made, so I asked my dad what was it all about and he explained to me that it was something we all have to pay for the government to use that money into improving the city for all the people and that asking for the receipt was a way to force the merchants to pay to the government the real amount of taxes they received for what is bought. So I started checking the receipts, and it was a surprise to me to see that they also were increasing the value of the goods you were buying, like in the US, but the difference was that they already included in the total price, so that's why I wasn't feeling it as the scam I felt in US…but in the end, it was all the same.

Years passed, I grew up, and started working, and then figured out that they also discounted some money from my payment as a Tax, and besides that, I also had to pay part of my income for a retirement plan and that I also had to pay a part for a mandatory health plan. Then, when I turned 18, I also had to pay for something called the "Tax Declaration". A yearly paper where you should put all your income, the goods you own, the debts, and your bank movements to decide the amount of taxes you needed to pay, including the ones you have already paid when you buy something. It wasn't a big deal at the moment since only the people who earned more than 28.000€ yearly had to pay ($100 ́000.000 Colombian Pesos), and I was way too far from that.

Then my grandfather died, and my father and uncles inherited some real states, and since they were already paying a big amount of taxes for what they've earned and possessed, they decided to put the property and some cars to my name, so that the property wouldn't really affect them directly, but instead, they paid for my taxes during many years. So the only thing I had to do was to sign some papers and checks once in a while. It didn't affect me at all, but instead, I felt it was good, because all the banks loved me because I supposedly owned a lot of things and money, which I didn't own. It was easy to get credit, it was easy to get visas. At some moments I thought I was part of a figure of tax evasion, but then I learned, as Carlos explained to us that it was Tax Optimization (I ́m not sure if those were the words he used in class, but it was something similar). Those taxes were still being paid, but they were paid differently.

In Colombia, our tributary identification is called NIT (Number of Tributary Identification) with which you are subscribed to the RUT (Unique Tributary Register). It works as “a unique mechanism to identify, locate and classify people and entities that have the status of taxpayers declaring income tax and non-taxpayers declaring income and wealth, those responsible for the common regime, those belonging to the simplified regime, withholding agents, importers, exporters, and other customs users; and the other subjects of obligations administered by the Directorate of National Taxes and Customs” (1) (DIAN – Dirección de Impuestos y Aduanas Nacionales).

The difference between the common regime (2) and the simplified regime (3), is mainly the amount of taxes you will have to pay, and it depends basically of:

1) The amount of brut income you receive yearly, which should ́t be more than 3500 UVT*.

2) That you have a maximum of one store, office, the establishment of commerce or headquarters.

3) That they are not customs users, which I deduce it means that you don't import something to sell it.

4) That they have not concluded contracts for the sale of goods and/or provision of services taxed over 3500 UVT*.

5) That the amount of your bank consignments, deposits or financial investments during the previous year or during the respective year does not exceed the sum of 3,500 UVT*.

6) That the establishment of commerce, office, headquarters, local or business activities are not developed under franchise, concession, royalty, authorization or any other system that involves the exploitation of intangibles. (this is something I don´t understand how it works).

* UVT stands for Unity of Tributary Value, and it is defined by the DIAN each year. For this year it is $34.270 COP, which means that 3500 UVT represents $119 ́945.000 COP (€31.928.28) (4).

At some time in my life, I moved to Guatemala to work as a General Creative director for an advertising agency, so I learned a little bit about how the taxes worked over there. In Guatemala people saves all their receipts each month, and they always ask you when you pay if you want to add your NIT to your bill or, if not, they put it under the figure of CF (Final Consumer), which I never understood, but anyway each month people have to give all their monthly receipts to their accountant, and depending on how much taxes you have played in those receipts, and the amount you monthly earned, they would have to pay some monthly taxes. But, if you´ve already paid or collected receipts for more than a certain amount, you wouldn't have to pay anything or even have a positive balance in your taxes for the next month. You also have to pay taxes for your salary, depending on the amount of income, so if you earned more than a certain yearly amount, you would have to pay a little bit more than the others. I don't remember these values very well and I couldn't find them either, but the difference between the taxes you paid was something between 12% and 17% depending on your income, 5% more if you earned more than Q124.000 (Quetzales) (€14.548) yearly. I was lucky that because of the type of contract I had, I didn't have to pay any taxes since they paid me with a special bill, but I did have to pay taxes for my car each year.

In Guatemala, I also learned another figure called Exportation Bill (Factura de Exportación), which for what I understand means that if the product of the service was not going to be used in the same country, you might not have to pay taxes in the country you produces, but only in the country that it was going to be used. These cases I saw it when we were producing tv spots for Guatemala in another country, so we didn't have to pay taxes in the country we were producing the film content, but instead, we would have to pay them in Guatemala. And there was also an Income Tax called ISR (Impuesto Sobre la Renta), “that falls on the income or profits obtained by individuals, legal entities, entities or national or foreign assets that reside or not in Guatemala”. (5)

As you might have heard, in South and Central America, similar to the rest of the world, there's a lot of corruption and tax evasions, which in the end, affects the wellness of the country. People always fight because they don't see the taxes they paid reflected in health, education or infrastructure, and as the country debts some time raises because other people steal part of the taxes, they have to increase the amount of taxes people pay. For example, in Colombia, last year they increased the IVA from 15% to 17%, something that has a lot of people right now striking in the country, because they don't agree with that, but some of those people striking were the same who voted for some corrupt politicians in exchange for a meal. Sadly, I was reading the other day that only something like the 0.23% of those taxes goes to the education sector in Colombia, while 13% are destined to war even in supposed times of post-conflict.

I think that taxes are something that we should all be aware of, and even when mentally it's hard to pay them seeing that they are being stolen or not used for what we think we need, it's a necessity for the country to subsist. I imagine a future in which the taxes would be paid depending on the amount of climate consciousness you have, a world where you could pay fewer taxes depending on your carbon footprint, so in that way, if you have a negative carbon footprint, you could even be paid a Universal Basic Income, that comes from the money of those who are not being responsible with the earth at all, because in the end, the world and its resources is a good supposed to be property of all, and in that way, those who are not taking care of it should pay to the rest that does care because of the consequences that we are all going to suffer, because of the impact made by the excessive consumption of goods and resources. I think these would be a nice way to grant a future for the poorest, which in my opinion are the ones who less carbon footprint emit since they don't ́t fly in planes, consume excessive goods in plastic because they live more from what they grow, ride bikes or public transport and are not constantly buying clothes each season, while the big corps are subtracting our earth's resources only for their benefit and, as we spoke in class maybe even the machines that are replacing human labor should also pay taxes since they are making a profit for some while reducing the income for others. These would be a nice model to create a universal basic income: Machines + CO2 emissions = Taxes, that could be turned into UBI for the responsible ones.


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