In this scenario of economic crisis, falling tax revenues and the need to finance recovery programs, in Guatemala and Costa Rica it is already proposed to increase current taxes and create new ones.
Wednesday, September 23, 2020
Guatemalan authorities are already beginning to discuss the fiscal policy they will apply in 2021, when the economy will have to face the effects of the economic crisis generated by the covid-19 outbreak.
The Executive's plan is that by 2021 Congress will approve a budget of close to $12.95 billion, however, tax collection projections for next year have been set at $8.35 billion.
In order to cover the deficit of the Income and Expenses Budget for 2021 and increase collection, representatives of the Superintendence of Tax Administration (SAT) have suggested that the increase in the tax on cement and fuel should be evaluated.
Marco Livio Diaz, head of SAT told Prensalibre.com that "... as a country we have the responsibility to increase the tax burden and possibly a tax reform would be needed to achieve this and maintain the relationship between debt levels and tax revenues."
Diaz added that "... it is not expected to increase general taxes for the population, but rather some specific taxes and that for the time being, changes are being analyzed to the tax on the distribution of cement and the tax on the distribution of oil and its derivatives (fuels), known as IDP."
The plan being discussed in Costa Rica consists of the following: in order to access the $1.75 billion credit that is intended to be requested from the IMF, the government proposes to tax financial transactions, to increase the tax on the profits of companies and individuals, and to increase the tax on real estate.
After the announcement of the intention to increase the tax on the distribution of cement and fuel in Guatemala, businessmen believe that in this scenario of incipient economic recovery it is not a good idea to increase the tax burden.
In order to face the effects of the economic crisis generated by the covid-19 outbreak, Guatemalan authorities are already beginning to discuss the fiscal policy to be applied in 2021.
In order to access the $1.75 billion credit requested from the IMF, the Costa Rican government proposes to tax financial transactions, increase the tax on the profits of companies and individuals, and increase the tax on real estate.
On the afternoon of September 17, and in the context of a severe economic crisis that had been going on since before the beginning of the pandemic, the Alvarado administration presented the plan with which it intends to mitigate the fiscal impact of the Covid-19 crisis, a proposal to negotiate an agreement with the International Monetary Fund (IMF) to obtain a credit of $1.75 billion.
Despite a severe economic crisis, Costa Rican authorities have approved the imposition of a 1% VAT on several foodstuffs in the basic food basket, and 4% on certain tourist activities and construction services.
Before the emergence of the pandemic, the Costa Rican economy was already in a difficult state, and the impact of the covid-19 outbreak ended up hitting it in the worst way, which is evident in the performance of productive activity.
"If we want first-world services, we must pay first-world taxes" - Laura Chinchilla.
The tax burden in Central America hovers between Guatemala's 9.9% and Nicaragua's 17%. In Brazil its 29%, whereas Scandinavian countries have tax burdens around 40%.
Tax collection has been hardly hit by the economic crisis, making evident the need for fiscal reforms to solve the structural problems of the region's tax systems.
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