Opposition to Reforms to Free Trade Zone Law

The ICEFI states that the proposed reforms to the Free Zones Law in Guatemala encourage a public investment model based on tax privileges for specific groups of companies.

Wednesday, February 21, 2018

The Central American Institute of Fiscal Studies (Icefi) reiterates its arguments against continuing an obsolete and ineffective model of attracting public investment based on tax privileges for specific groups of companies and encourages the initiation of the discussion on a general investment law.  For this reason, it does not recommend to the Congress of the Republic the approval of the reforms to the Law on Free Zones contained in the legal initiative with the registry number 5174.

From a statement issued by the ICEFI:

The Icefi reiterates that due to the inability to generate domestic savings, Guatemala and the rest of Central America's strategy has been to try to attract foreign investment through tax privileges which, far from achieving an increase in investment, has reduced fiscal space for the financing of public economic and social investment. During the period 1990-2016, despite the existence of exemptions and other differentiated tax treatments, Guatemala attracted foreign investment on average of only 1.5% of GDP, making it the least successful country in the region in that strategy. 

According to national and international surveys, such as the Global Competitiveness Index, tax rates are not the determining factor when entrepreneurs decide not to invest in Guatemala. On the contrary, the factors that discourage investment are high levels of crime and theft, corruption, the inefficiency of government bureaucracy and an inadequate supply of infrastructure. For this reason, the Icefi believes that Guatemala must abandon the obsolete strategy of maintaining or expanding special tax treatments for specific groups of entrepreneurs such as the maquila industry, net centers and free zones, and advance in the discussion of a general investment law that would correct the aspects that are actually preventing the arrival investors or even driving them away.

Read full release (in Spanish).



More on this topic

Tax Reform and Free Zones

September 2018

Entrepreneurs in Costa Rica are warning of the negative impact of not maintaining, in the new law of public finances, the VAT exemption on local purchases of goods and services carried out by free zone companies.

The Association of Free Trade Zone Companies of Costa Rica (Azofras) points out that in the bill to strengthen public finances that is being discussed in the Assembly, motion 302 was not revised, a motion which aims to keep the VAT exemption on the local purchases of goods and services carried out by free zone companies, both to be incorporated into export products and for their operations. Currently the sales tax exemption applies. 

Increasing the Attractiveness of Investing in Panama Pacifico

October 2014

The government is promoting a bill that will modernize the tax status of high-value services and the movement of goods from the zone to other countries.

From the preamble to the draft submitted to the National Assembly of Panama:

Law 41 of July 20, 2004, created the Panama-Pacific Special Economic Area as a scheme for legal matters, tax, customs, labor, immigration and special business, oriented towards encouraging and promoting investment, job creation and to make the Republic of Panama more competitive in the global economy.

Balance of Free Zones in Costa Rica

October 2011

The Foreign Trade Promoter has revealed in a study the benefits that free trade zones contribute to the country, including the 58 thousand jobs that pay 60% above the average private sector salary.

From a press release by PROCOMER:

A study by PROCOMER reveals the benefits of free zones in Costa Rica:

Free Trade Zone Reform in Guatemala

August 2010

If proposed reforms are approved, the country should find it easier to attract foreign investment.

The reform to the Free Trade Zone law is expected to be approved by the end of the year, stated congressman Mariano Rayo.

"This initiative seeks to create conditions favorable to encouraging investment.

 close (x)

Receive more news about International Commerce

Suscribe FOR FREE to CentralAmericaDATA EXPRESS.
The most important news of Central America, every day.

Type in your e-mail address:

* Al suscribirse, estará aceptando los terminos y condiciones


Gluten-free food business for sale

Operating Company dedicated to the manufacture of gluten-free and sugar-free products, OHNE brand.
The OHNE brand has 8 product lines: square bread, sweet...

Stock Indexes

(Apr 6)
Dow Jones
-5.60%
S&P 500
-5.10%
Nasdaq
-5.64%

Commodities

(May 29)
Brent Crude Oil
37.960
Coffee "C"
97.9
Gold
1,735
Silver
18.485