Fiscal Outlook in Central America

In one of the regions that receives the least amount of taxes in the world, the tax burden remained relatively stable in 2017.

Wednesday, February 28, 2018

From the section Fiscal Outlook for Central America, from the report "Macro-fiscal Profiles: 9th edition", by the Central American Institute of Fiscal Studies (Icefi):

In 2017, the fiscal trajectory of countries in the region remained relatively constant with respect to what was observed in 2016. The following are highlighted as policy orientations: a) lack of political agreements, which transformed into a real impossibility of increasing tax revenues through tax reforms or strengthening the administrative capacity of tax administrations, and b) implementation of austerity programs, which in several countries had a greater impact on capital expenditures, in order to avoid an increase in the fiscal deficit and public sector debt.  

Efforts to control spending had more tangible results in El Salvador and Honduras, where fiscal deficits were reduced and at least the rate of public debt growth slowed. 

In Guatemala, the level of spending also showed poor execution, but in this country, this is explained more by the executive's inability to implement public programs.

Costa Rica, for its part, failed to reduce spending as announced, largely because of provisions of judicial authorities that forced the Executive to reverse intentions in that regard. 

Read full report (in Spanish).

More on this topic

The Unstoppable Public Debt

September 2018

"Public debt in terms of simple average for the Central American region will continue growing, reaching 43.1% of GDP in 2018, after having registered 42.5% in 2017."

The Central American Institute of Fiscal Studies (Icefi) estimates that for the current year the size of public expenditure of the Central Government in relation to the respective Gross Domestic Product of each country will be 21.4% in Costa Rica, 20.4% in El Salvador, 20% in Honduras, 18.4% in Nicaragua, 17.6% in Panama and 12.1% in Guatemala.

Tax Burden is Growing in Central America

August 2017

The tax burden grew from 13.4% in 2013 to 14% in 2016, both due to the delayed effect of the tax reforms in Honduras and Nicaragua, as well as better management on the part of tax entities in Guatemala and Panama.

From the Regional Economic Report (IER) 2016-2017: Opportunities and challenges for Central America, by the SIECA:

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 Accounts in Central America

November 2014

The average tax burden for the region is 13.4% of GDP, while the average public expenditure increased from 18.7% in 2013 to 19.2% at the end of 2014.

From the Introduction of the report Macrofiscal profiles in Central America, from Instituto Centroamericano de Estudios Fiscales (Icefi):

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