Guatemala: Few Advantages to Formalizing Companies

Although they are "often as dynamic and innovative as formal companies" enterprises in the informal sector say they see no benefit to regulate their situation.

Monday, September 8, 2014

A study by the World Bank concluded that "... 73% of informal firms have no interest in becoming regulated," not only because of tax payments, but simply because they say they receive no benefit from it. reports that "... As for the 27% who are willing to legalize their status, the report cites that they encounter the following benefits: Access to finance, legal protection and ability to issue invoices."

"... The report concludes that informal enterprises 'are often as dynamic and innovative as' formal ones. It says that in Guatemala three quarters of unregistered entrepreneurs were motivated by "the opportunity" and not 'driven by need.'"

More on this topic

SMBs: Benefit Period Extended

December 2019

In Honduras, Congress extended for two more years the validity of the Law to Support Micro and Small Enterprises, which grants benefits such as exemption from payment of income tax and other taxes.

To opt for the benefits granted by the law, interested parties must process their permits, national and municipal licenses for its operation, reports a statement issued by Congress.

Amnesty Proposed for Companies to Move Out of Informality

June 2018

In order to facilitate the formalization of more companies, in Costa Rica the private sector has proposed to the government the implementation of a fiscal amnesty exclusively for the informal sector.

The Costa Rican Union of Chambers and Associations of Private Enterprise (Uccaep), proposes that the tax amnesty be carried out avoiding retroactivity and reprisals, and that it has a short period of duration. 

Why do SMEs fail?

March 2012

Over 50% of SMEs fail before they are three years old, 90% are no more than five years old and only 10% survive.

In the case of Nicaragua the subject is sensitive, "because 60 percent of its business backbone is made up of micro, small and medium enterprises, which account for 40 percent of gross domestic product (GDP), estimated at more than six billion dollars.

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.

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