A Concise Liberal Critique of the Economic Activities Tax

Abstract

In our study of the IAE (Economic Activity Tax), we concluded that by taxing gross income without considering costs, it becomes a confiscatory tax. Unfortunately, recent reforms to this tax have intensified its voracity and shifted its effects toward the erosion of private property. The changes occurring in the IAE over the last decade have generated confusion and legal challenges; in response, the LOCAPTEM was enacted. While its main mission is to harmonize taxation, we find it has a marked tendency to centralize power and distort municipal autonomy, clashing with liberal principles and affecting the constitutional principles of taxation. Therefore, a substantial reform that incorporates minimally liberal concepts is considered necessary.