##Third Period, 1974-1984

December 31, 1974, the new principles of the tax code were enunciated: fair, simple, efficient and neutral from the point of view of individual decision-making (Decree N 110). The main modifications introduced were

1. Introduction of an inflation accounting mechanism, Monetary Correction, to protect tax revenues from inflation. Also, Tax Units replaced Vital Wages as basic measurement unit.
2. Finally all rents from labor, included in second category tax, faced identical rates and brackets found in CGT.
3. Introduced a new tax scale to caution the general progresiveness of the tax system. Started to apply equal treatment to income coming from different sources
4. Among inderect taxes a new tax , the VAT , replaced the old taxes on sales and demand. The VAT rate was set at 20%.