Tax Increase Rejected

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.

Check out the "System for monitoring markets and economic situation in Central American countries", developed by CentralAmericaData.

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.

See "More Taxes: An Idea That Appeals to Governments"

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."

Currently, the economy is in a recovery phase, since the most recent official report details that after the IMAE in Guatemala registered a -11% year-on-year variation in May of this year, during June and July the production contractions were lower, reporting falls of 7% and 5%, in that order.

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More Taxes: An Idea That Appeals to Governments

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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.

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A report entitled "Tax Statistics" prepared by the Organization for Economic Cooperation and Development (OECD), analyzes the behavior of tax collection in Latin America.

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