Analysis of Section 40 of the Economic Development and Fiscal Sustainability Act in the post COVID-19 pandemic: Implications for progressivity and legal certainty in income tax personal expense deductions.

Abstract

The Organic Law for Economic Development and Fiscal Sustainability (LODESF) has implemented relevant changes in the tax field, particularly the determination of the tax base for the personal income tax. The LODESF has established a basic non-taxable fraction, which serves as a threshold to exempt from paying taxes. For fiscal year 2022, this fraction amounts to $11,310.00. In addition, deductions are allowed for expenses related to rent, mortgage interest, food, alimony, clothing, tourism, health, education, as well as expenses on art and culture. These regulations aim to reduce the tax burden on taxpayers and encourage tax compliance. This work is based on that analysis.