A new bill, agreed between the government and the private sector, expands tax incentives granted to companies in the sector through the Certificate of Industrial Promotion.
The text was drafted after the government and the private sector reached consensus on how to define tax incentives to which companies in the sector are entitled to.The project will be submitted to the Cabinet this month and will be discussed in the current legislative period.
In 2016 exports from the free zone regime fell by 4% compared to 2015, and those from companies covered under the maquila incentive law, fell by 6%.
The negative results in foreign sales of companies operating under one of the two incentive schemes is due in part to the departure of several companies from the free zone regime, having been affected by the Emergent Employment Act.
Companies that hire people aged between 18 and 29 years will be able to deduct from income tax between 3 and 5 minimum wages, depending on the number of young people they hire.
With the amendment to the Incentive Law for the Creation of First Employment for Young People in the Private Sector, adopted by the Assembly, tax exemptions are established for businesses that hire young people aged between 18 and 29.
The Varela administration is considering improving incentives granted to finance the construction and purchase of homes priced between $80,000 and $120,000.
The government plans to build 175 thousand houses in 2017, of which 100,000 correspond to the ´Roofs of Hope program', 45,000 to the 'Bono Solidario' program and 30,000 to the 'preferential interest rate'.
According to the ICEFI, "tax incentive policies seem to be a lost opportunity because of permanent tax expenses and the lack of tangible social benefits."
From a statement issued by the ICEFI:
Within the framework of the international meeting on Tax Justice and Transnational Fraud, held in Costa Rica, a study was presented on October 20 entitled 'The effectiveness of taxincentives for investment in Central America' in which an analysis was undertaken of the Central American experience in investment attraction through tax incentives.
A proposal has been made to extend for two years tax benefits for private investment developed in the area of the Casco Antiguo de San Felipe, in Panama City.
The draft aims to extend the conditions afforded by Law 136 of 2013, because, as discussed in the preamble of the document,"... the timeframe of two years has been insufficient for many owners and investors, and having expired on January 17, 2016, a situation that has created where there is a gap in terms of benefits, hurting the approval of loans and bank financing and tax exemptions and benefits for the National Directorate of Revenue with the consequent loss of the exemptions set forth in this regulation".
A bill proposes extending to the agribusiness sector the incentives outlined in Law 28, such as exemption from export tax and import of raw materials.
From a statement issued by from the National Assembly:
Extending the benefits of Law 28 of 1995 on the organization of production incentives, better known by its initals (in Spanish) ROI, was proposed through a bill put forward by the Ministry of Commerce and Industry.
Raw materials, veterinary pharmaceuticals, pesticides, seeds and live animals are exempt from the 15% sales tax.
The current document sets out eight categories of items from raw materials,supplies, equipment and machinery used to produce them. The different classifications contain 323 tariff items for tax free products.
The ICEFI highlighted the achievement in reducing the fiscal deficit, but noted "weaknesses in access to information and opacity in the management of public resources."
From a statement issued by the ICEFI:
The Icefi is concerned about the tax changes in recent years because part of its impact is an increase in the regressivity of the tax system, less fiscal space for social spending, as well as a latent opacity in the discussion on the use of State property and new fiscal institutions.These negative effects detract from the achievements made in terms of macro-fiscal stability in the medium term, we warn, this will increase democratic ungovernability, public distrust and restrict the scope for sustainable, sustained and inclusive economic growth.
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