El Salvador: Legislators Vote No to Tax Reform

The opposition in the Assembly is calling for government approval of the bill on fiscal responsibility before approving the issuance of debt of $1.15 billion and a proposed tax package.

Friday, May 23, 2014

The lawmakers argued that there is a need to thoroughly scrutinize the text of the proposed reforms, as there is uncertainty over the destination the government will chose for the proceeds as well as strategies to revive the national economy in order for the state to ensures there is liquidity rather continuing to generate more debt for the country.

The head of the ARENA fraction, Donato Vaquerano, said that the Finance Minister Carlos Cáceres, "is lying" about the use of funds, as, according to him, he has also done on other occasions when asked to approve money to pay debt ... He also recalled that in October 2012 the Government did not comply with a draft fiscal responsibility law which was made in exchange for the Assembly approving the issuances of State Treasury Bills for $800 million, as well as other financial commitments with the International Monetary Fund (IMF).

More on this topic

El Salvador: Dangerous Increase in Government Debt

April 2015

Instead of cutting back on spending, the State has once again called on the Legislature to approve borrowing another $900 million, which will bring total debt to a record of nearly $17 billion.

Currently it is estimated that GDP is around $25 billion, meaning that state debt represents 68% of national production, excluding interest payments.

El Salvador: New Warning from Fitch Ratings

March 2015

According to the ratings agency the political polarization that characterizes the Legislature which will take office on May 1 could hamper the implementation of the fiscal reforms that the country needs.

From an article by Fitch Ratings:

El Salvador's New Legislature May Yield Fiscal Restraint

El Salvador to Issue $350 million in Bonds

November 2014

The Ministry of Finance plans to issue before the end of the year the balance remaining on the $1,150 million in bonds approved by Congress in May.

Amid criticism from the opposition and the private sector over the continued increase in public debt, the government is preparing for the end of the year the issuance of $350 million, the remainder of the $110 million which was requested and approved by Congress in May.

More Taxes in El Salvador

July 2013

The third tax bill is now ready; it will tax bank transfers, luxury homes, as well as products used by printing companies.

The Ministry of Finance has not yet said when it will send the plan, which expects to increase revenuea by about $100 million, to the Legislature. According to the chief of Finance, Carlos Caceres, "we are working on the project which will, by 2020, return us to the same pre-crisis debt levels (before 2008).