Trying to make sense of Colombia’s “Strata” economic system (2014)(occasionalplanet.org)
occasionalplanet.org
Trying to make sense of Colombia’s “Strata” economic system (2014)
http://occasionalplanet.org/2014/09/09/trying-to-make-sense-of-colombias-strata-economic-system/
16 comments
My theory is that as a lot of people don't declare their full income in developing countries (and are quite tax-adverse due to a perception of high corruption), a way to redistribute is to tax "luxury" goods like vehicles or other visible stuff like the strata.
As a Colombian I can say that most people declare full income due to fear of being chased by DIAN (colombian IRS) which is probable the most corrupt institution in the country, meaning that if you don't declare your full income they'll shake you down for everything you have, I've personally heard cases of people making innocent mistakes in taxes and getting extorted for millions upon millions by "honest DIAN officers".
The strata system was created to create a form of "equality" where rich people helped poor people via subsidies, however, this has been abused by both sides since the very beginning (poor people using 10 or 20x the normal amounts of water and electricity to "fuck the rich people" and rich people paying to get their houses declared "historical patrimony" to avoid paying subsidies)
In the end, the strata system was created for a different society that we have right now, nowadays almost all buildings are estrato 3 or 4 in areas where estrato 2 was the highest possible.
I have no idea what could replace the strata system (I'm not a political scientist or anything that resembles that) but I do agree that the system is broken and should be replaced by something better.
The strata system was created to create a form of "equality" where rich people helped poor people via subsidies, however, this has been abused by both sides since the very beginning (poor people using 10 or 20x the normal amounts of water and electricity to "fuck the rich people" and rich people paying to get their houses declared "historical patrimony" to avoid paying subsidies)
In the end, the strata system was created for a different society that we have right now, nowadays almost all buildings are estrato 3 or 4 in areas where estrato 2 was the highest possible.
I have no idea what could replace the strata system (I'm not a political scientist or anything that resembles that) but I do agree that the system is broken and should be replaced by something better.
How do the "honest DIAN officers" that you talk about report their exhorted income?
"Who taxes the taxmen?"
To eliminate the strata system we'd need to force everybody to report their incomes and expenses. And that's a huge amount of data to process, that's why the strata was devised. So yeah, we could, and should, but we won't.
How about replacing it with nothing?
It's not necessarily tax evation though. There are really rich people who live in mansions in the rural area and pay 'estrato 1' prices for certain utilities because that's actually the infrastructure they're getting. So in order for this household to contribute to wealth redistribution, the property is assigned an 'estrato 6' despite paying really low prices for utilities.
This is very much true in Russia, where unemployed young people often ride A-class cars or own expensive flats. They are not taxed because their declared income is untaxed gifts.
Taxes proportional to value of property balances theese extremes nicely. Unfortunately, not feasible in current russian political climate.
On the surface this looks a little bit like a Land Value Tax, which tends to get broadly praised by economists as efficient and fair. Enforcement and structure appears to be uneven, but it doesn't sound much different from property taxes here in the US.
It's a different animal than property taxes (which we have in Colombia too.)
If you want to comparison shop high speed internet access, for example, you have to get a quote from each provider, as the rate is based on your estrato. Things have gotten better recently but until the last couple years, those rates were just in a big binder in the office, not something you could just look up online. I feel it hurts competition - providers can’t just advertise a monthly rate - and I can only imagine the added complexity in billing systems, etc, that ultimately is passed on to the consumer.
If you want to comparison shop high speed internet access, for example, you have to get a quote from each provider, as the rate is based on your estrato. Things have gotten better recently but until the last couple years, those rates were just in a big binder in the office, not something you could just look up online. I feel it hurts competition - providers can’t just advertise a monthly rate - and I can only imagine the added complexity in billing systems, etc, that ultimately is passed on to the consumer.
Well, is this really wrong? If I get work done on my house as a young person, I pay as much as 10x what the same workman would charge my grandmother in law. The workman knows he/she can get away with charging a young person who doesn't have to live off social insurance more. The workman would never get the job from a retired in Prague if they charged what they charge yong people. However, if they charged everyone the reduced rate, then they would never cover the cost of tools and training.
Although the Stratum idea seems logical and even good (at least for me) the basic problem in developing countries is always the same: widespread corruption and wirepulling.
Reminds me of the South African system. Enforcement of electricity levies depends very much on location. Townships vs leafy suburbs