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.
Thursday, September 24, 2020
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.
The plan to start discussing the increase of the tax on the distribution of cement and fuel is one of the most controversial in the country, since at this juncture the country is urgently in need of proposals to reactivate the economy.
Erwin Deger, president of the Guatemalan Chamber of Construction (Construguate), explained to Prensalibre.com that "... at this time it is not a good idea to raise the tax on cement, since the construction sector is barely recovering after the suspension of projects due to the pandemic. I think the superintendent shouldn't have made that comment, and should rather insist on fighting cement smuggling on the border with Mexico."
For Enrique Melendez, executive director of the Guatemalan Association of Gasoline Exporters, "... currently, taxes on the distribution of oil and its derivatives (IDP) and VAT represent around 30% of the total price of the gallon of superior and regular gasoline. Therefore, to put more pressure on the IDP would not only impact on the final consumer, but also on the prices or costs of transportation and distribution chains."
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.
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.
In Costa Rica, the Alvarado administration would be considering the creation of a tax on each transaction that a person or company makes through a financial entity, a tax that will discourage savings and motivate people to use cash.
In order to discuss a medium and long term credit with the International Monetary Fund, the Costa Rican authorities would be planning to design and create a new tax, which consists of each person paying a tax of ¢3 for every ¢1.000 in the transactions they make through a bank, finance company, mutual fund, stock exchange or any other financial entity.
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.
The authorities that will assume the government in 2020 in Guatemala could evaluate options to tax temporarily some sectors, however, there would be a risk that these taxes become permanent.