Tuesday, June 18, 2024

Pay cuts will produce savings of 38 billion pesos, before lost tax is factored in

President-elect Andrés Manuel López Obrador’s proposed pay cuts for thousands of high-ranking government officials will produce savings of almost 38 billion pesos (US $2 billion), an analysis shows.

The study, which was conducted by specialists close to the incoming administration, shows that 53,997 high-ranking officials including cabinet secretaries, undersecretaries and departmental heads, among others, currently earn gross salaries that add up to a combined 75.16 billion pesos (US $3.95 billion) annually.

The analysis, of which the newspaper El Universal has a copy, says that across-the-board cuts of 50% would reduce that payroll cost to 37.58 billion pesos.

But there’s a catch.

By reducing salaries, the amount of income tax that high-level bureaucrats pay will also go down.

Instead of withholding 27 billion pesos (US $1.4 billion) as is currently the case, tax authorities will only collect 8.5 billion pesos (US $446 million).

That means that the net saving from cutting salaries is a more modest 18.6 billion pesos (US $976.1 million).

The biggest savings will come from the Secretariat of the Interior (Segob), which currently has the highest payroll of any government department, employing 1,290 high-ranking officials to whom combined salaries of 2.27 billion pesos will be paid in 2018.

In the weeks following his landslide victory in the July 1 presidential election, López Obrador and his prospective cabinet have outlined a range of austerity measures they intend to adopt in government.

Pensions for former presidents and private medical insurance for officials are also on the chopping block.

López Obrador has said he will earn a net monthly salary of 108,000 pesos (US $5,670), which is less than half the amount current President Enrique Peña Nieto takes home.

He has also pledged to forego personal security, sell the presidential plane and convert the president’s official residence into an arts and culture center.

Selling the Boeing 787, which was delivered in 2016 after former president Felipe Calderón placed the order for it, could prove costly. The newspaper Milenio obtained documents that showed an analysis by the president’s office in 2015 revealed that the selling price could finish up being $137 million less than the $218.7 million that was paid.

López Obrador will be sworn in for a six-year term on December 1.

Source: El Universal (sp)

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