Is it necessary to raise taxes in Guatemala?

Increased economic activity and tax collection imply that increasing taxes will be counterproductive.

Wednesday, April 28, 2010

The crisis seems to be over. At its worse, fiscal revenue fell, linked to less consumption, exports and imports. This effect teamed with sustained levels of social expenses, and left the government very short on resources, a problem authorities intend to solve via tax hikes.

In an article in, José Raúl González Merlo analyzes some clear signals from Guatemala’s economy, which allow him to estimate an increase of more than 10% in tax revenue. This would balance the fiscal situation, but only if the government reduces public spending.

Merlo insists that increasing taxes might cause more damage than good: “… when analyzing recent data, it becomes clear that raising taxes is unnecessary. Economic recovery will continue providing more revenue for the Government. Let us not allow this virtuous circle to be interrupted by the intentions of corrupt officials.”

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