The Tax Burden Calculation

A critical view of the simplistic methods used in calculating the tax burden that supports an economy.

Wednesday, January 5, 2011


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When analyzing a tax reform proposal, the first argument considered is what is the percentage of taxes collected by the state in relation to the Gross Domestic Product (GDP) of the country.

Juan Carlos Hidalgo, on his blog at Elfinancierocr.com, shows with solid arguments, the fallacy of comparing, without thorough analysis, the public figures of the ratio of tax revenue to GDP, which leads to erroneous conclusions which usually hide the main problem: the spending inefficiency demonstrated by the state with the money collected through taxes.

Hidalgo´s analysis relates to Costa Rica, but the concept is transferable to all Central American countries.

More on this topic

International Bureaucrat Promotes Greater Taxation

April 2011

An international bureaucrat, whose salary is exempt from paying taxes, is one of the main supporters of tax increases in Costa Rica.

Alberto Barreix, tax expert from the Inter-American Development Bank (IDB), boasts that he has supported more than 50 tax rises in various countries.

A New Fiscal Agenda for Guatemala

January 2016

In the opinion of the Central American Institute of Fiscal Studies, the only way to consolidate public finances in a sustainable way is to reduce tax breaks and increase tax collections.

From a statement issued by the Central Institute for Fiscal Studies (Icefi):

The Central American Institute for Fiscal Studies (Icefi) has proposed as a fiscal agenda for development: meeting the public demand for integrity and transparency; effective, efficient and effectual public spending as a tool for inclusive and democratic development; and financial viability with taxation being part of democratic accountability.

Fiscal Policies and Systems

March 2010

High taxes and evasion eroding economic growth in Latin America and the Caribbean.

New IDB study says governments must simplify tax systems and reduce evasion

Complex tax systems and widespread evasion are distorting investment decisions by companies in Latin America and the Caribbean, reducing the efficiency of markets and preventing governments from investing in infrastructure, education and other key public goods.

Guatemala: 2013 Public Finance Figures

January 2014

The tax burden was placed at 10.9%, as a result of a tax proceeds of $5.912 million, 8.1% higher than in 2012.  

Guatemala's fiscal deficit ended the year at 2.2%, below the Government's initial estimate of 2.5 %.

From a press release by the Ministry of Finance:

The Ministry of Finance reports that at the close of the fiscal accounts for 2013 has been completed and given results that demonstrate the efficient and sound management of fiscal policy. The deficit stood at 2.2% of GDP, a level that fosters macroeconomic stability and economic development. The delay in approving budget support loans and behavior of tax revenues represented adversities which were properly dealt with.

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