The union of transporters has warned that if the increase in the fuel tax is approved, "the cost of transporting cargo to Guatemala will rise by $12.75."
The productive sectors have indicated that the state budget approved for 2015 is underfinanced and will force the government to raise taxes or issue more debt in order to comply with it.
The approved general budget for the nation is $4.824 billion an amount which according to the private sector can not be covered by current tax revenues, therefore in order to raise this amount there must be either be cuts made to services such as subsidies or social programs, increases or creation of more taxes, or more debt taken on.
Employers point to political instability, energy costs and lack of infrastructure as the main factors keeping out investment and reducing competitiveness.
A survey carried out with employers by the National Association of Private Enterprise (ANEP) showed as its first result the lack of competitiveness of the country in terms of attracting foreign investment, due to uncertainty created by political instability.
The government has agreed to modify the terms of the tax reform proposal to take into account criticisms made by the private sector.
Salvadoran private companies have outlined to officials the adverse effects that the country would face if the proposed new tax measures were applied, receiving signals of openness to a discussion from the Government, who for the first time since 2009 and 2010 has agreed to negotiate tax reforms with entrepreneurs.
The business climate, smuggling and taxes have forced the tobacco company to close its operation in the country.
In a letter sent on March 5, to their suppliers, British American Tobacco announced the closure of its operations in El Salvador. The increase in smuggling and lack of competitiveness in terms of cost are some of the reasons for its departure.
The Supreme Court has ruled that the collection of a 1% tax over revenue as minimum payment for income tax is unconstitutional.
The ruling came months after the submission of a claim of unconstitutionality "through a legal team set up by the National Association of Private Enterprise (ANEP), along with union representatives and other affected MSMEs," reported Laprensagrafica.com .
A draft bill submitted for consultation to employers by the government of El Salvador, proposes a charge of 0.5% on the assets of foreign investors.
An article in Elsalvador.com reports that "The Government plans to charge a "premium" of 0.5% on total investment assets to entrepreneurs who arrive in the country attracted by the newly proposed law on legal stability, according to a draft by the Secretariat sent to the Chairman of the National Association of Private Enterprise (ANEP) a few months ago.
ANEP, the Association of the Private Enterprise, stated its regret with the recently approved tax hike.
ANEP press release:
Regarding the tax increase approved by the FMLN, GANA, PCN and PDC, the National Association of Private Enterprise, ANEP, declares:
1. We lament that the representatives who voted for more taxes care more about what the government offers them in exchange for their votes, than the consequences of causing unemployment and deepening poverty in El Salvador.
The private sector has rejected the FMLN’s proposal to reform income tax law.
Jorge Daboub, president of the National Association of Private Enterprise (ANEP in Spanish), said the proposal is not based on a deep technical analysis of the subject. The first action that should be performed is to correct the "waste of Salvadorans’ tax dollars."
"Daboub believes that the proposed 0.8% tax that is to be applied to the gross income of companies is a new tax that punishes employers who have been affected by the economic crisis.
The National Association of Private Enterprises in El Salvador said the government is not “going on a diet”, but instead is still increasing public spending.
ANEP President, Jorge Daboub, is accusing the International Monetary Fund of having changed their policies regarding austerity recommendations, now that the government of El Salvador is aware of the extension on the limits of subsidies, which passed initial targets of 3.3% and 3.2% for 2011 and 2012 respectively, up to 4.5% and 3.9% compared to the same period.
Private business leaders spoke out against the creation of new taxes and increasing income tax.
"The private sector struggles between uncertainty and anger, after a study by Eurasia ensures that the Salvadoran Government is expected to approve an increase to the ceiling of income tax, a new estate tribute and a security levy," Laprensagrafica.com reports.
The business sector will present proposals to solve the fiscal deficit, which may also be the foundation of a social pact.
17 proposals will be presented, aimed at two large areas: reducing spending and increasing revenue.
Jorge Daboub, president of the Salvadoran Chamber of Commerce and Industry, explained: “We understand that the country has a serious fiscal problem, the deficit has worsened due to the country’s negative economic situation.
If the tax reform proposed by the Salvadoran government is enacted, machinery imports would pay 13% value added tax.
Additionally, expenditure reimbursements and tips would pay value added tax.
Economist Luis Membreño told newspaper Prensagrafica.com: "This, in addition to the elimination of the 'drawback' benefit, does not foster investment nor job generation.