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The sandwich population is a line that is outside the aid and assistance of the State, but does not have a consolidated economic position either. It will receive a good part of the impacts of the reform and this can be detrimental to the national economy in general, since this segment is part of the engine of consumption.
Once again, like a wolf disguised as a sheep, the 2021 tax reform has begun to be catapulted into public opinion as “Social, solidarity and sustainable reform”. Following the general lines of the children’s fable, the Government disguises a law with attractive adjectives that will affect the pockets of many Colombians, especially those whom we have already referred to in these pages as the sandwich population.
Broadly speaking, the sandwich population is understood as one that may have income levels higher than those of the poverty and vulnerability line, but that does not always have the stability or complete formality to classify them as classic wage earners. It is worth remembering that, according to DANE, the labor informality rate reached 49.1% in the country in the last quarter of 2020, and cities such as Cúcuta and Sincelejo have figures above 65%; many of these informal are part of the population group we are talking about.
The sandwich population is not only a typical phenomenon of the countries of the periphery. In the central countries that, despite having greater elements of help and support through welfare states, categories such as “the precariat” have also emerged, which the British professor Guy Standing associates with a class that does not have the homogeneity of the working class, nor the stability and acquired rights of the workers of four decades ago. It is a line with educational diversity, but with an increasingly complex social mobility and with conditions equal to or inferior to those of their parents. Without a doubt, the precariat is part of the sandwich population.
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Thus, then, this population faces not only the difficulty of living on a day-to-day basis, an exercise that is done on many occasions under the sign of debt, but now, with the crisis driven by the pandemic, their income will be affected. real with a higher tax payment.
From what is known about the reform (presentations and statements, not documents), the Government aims to tax various goods in the basket that were not and increase the rate to 12% on many fundamental goods in the consumer basket of a average citizen. On the other hand, it seeks to expand the income base in a country where the minimum income is very close to the average. These measures increase the pressure on the already deteriorating conditions of many Colombians who are part of the sandwich population.
A few days ago, one of the economists of the seventh technocracy in the Ministry of Finance argued in his networks that if a person earned $ 2.5 million, this level of income was higher than 90% of Colombians and, therefore Therefore, it would be ethical to ask them to contribute to assisting the rest of those who have also had a bad time in the pandemic. It is worth mentioning here that, due to the scope of the reform, this is not only to shake hands with the most affected, but also to extend it to the country’s debt holders, since more than 50% of the new collection that is expected with the reform it will go to pay debt.
Returning to the point, and here one of the saddest paradoxes in Colombia, given the high levels of inequality in the country, you can be part of the top 10% of people with higher incomes if your salary is 2.5 times the minimum wage. What this hides is that, having this level of income, you can also be part of the sandwich population, and this is where this story gets complicated.
A family of the sandwich population with four members, and only one who receives a salary of $ 2.5 million in a simple arithmetic exercise can spend a third of its income on a mortgage loan for a new home on the outskirts of a Colombian city . Another third goes to food and transportation expenses for their nucleus, and the last is for various issues, including those involving education, care, among others.
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You do not have to go into detail in this general assignment to know that you are a citizen who cannot save and, quite surely, other debts are added to your mortgage credit. Are these Colombians then the ones who should help the rest of the victims of the crisis when they can hardly handle themselves at this moment?
Once the support programs for debtors who have postponed the worsening of the past-due portfolio indexes end, households will not only face the shock of debts again, but will also receive the cold water bucket with a higher payment of VAT and possibly a rent payment that, while it may be small as the economists of the seventh argue, is significant when you live from day to day.
Households in the sandwich population are then driven into a Ponzi situation, where neither capital contributions nor interest on their loans can be paid with income and so they fall into the game of paying debt with debt. Today it is common for many Colombians to request free investment loans to release their credit cards and be able to continue using them, but with another credit behind them. It is a very widespread practice by bank advisers, since the interests of some bank loans are better than those of cards, but they create greater dependence on the bank.
The reform is then sold under a message in which we must all put to pay the broken dishes of the COVID-19 crisis, but at the same time the large economic groups already move their bishops so that in the final article they have the least damage collateral.
The parties close to the financial elites are already analyzing the reform accompanied by tax experts, who advise large banks and investors, as was learned by publications in the media.
Although the reform is announced as solidarity, little or nothing is so, since the few redistributive elements that it has run the enormous risk of disappearing on the way by a Congress that is in a pre-electoral year and that has been discussing the text of the law in secret, with his back to everyone.
In the end, as Professor Orlando Villabona has shown, Colombia will continue to be a good tax haven for the rich, as it is a country where capital inflows remain relatively privileged. Professor Villabona argues that, for example, dividends have many ways to avoid taxes, because if they are decreed in shares, or not decreed, there are no taxes: in Colombia dividends greater than $ 10.9 million pay 10% of income tax, while in other countries it is paid between 23 and 50%.
Today the “hyper-mega-rich” (1 / 100,000 of the richest in the country) only pay an effective tax rate between 1 and 2%, while in other OECD countries they pay around 25%, according to the work of Juliana Londoño and Facundo Alvaredo. There is then room for raising in the high elites, but, as already said, the reform in the end will have a lesser effect on them given their power of lobby and recruitment in the Legislative.
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The Government aspires to raise $ 25 trillion, of which it has been announced that $ 10 trillion is to finance social spending and the other $ 15 trillion to pay debt, which in the end is money owed to those who want reform, but with less collateral effects on their coffers.
And while paying the debt judiciously guarantees access to markets and macroeconomic stability, it is also stability for financial groups that press heavily through their tanks of thought for the urgent need for reform.
Under these lenses, the reform is more sustainable and supportive with creditors than with a good part of that sandwich population that has not received many of the benefits from the Government, but that increasingly lives with water closer to their neck in the midst of the crisis largest in nearly a century. It should not be forgotten that trying to recover the economy with taxes that hit aggregate demand is a theoretical contradiction, but that it is convenient for the economy. the state.
* Professor at the School of Economics of the National University.
