In Costa Rica, the central government's financial deficit at the fifth month of the year maintained its upward trend as a result of higher interest expenditure and stood at 2.6% of GDP.
While the behavior of the financial deficit is largely due to interest payments, the increase in capital spending also shows significant variation, which translates into better infrastructure conditions needed to facilitate the mobility of goods and people, explains a newsletter from the Costa Rican Ministry of Finance.
The business sector welcomes the progress achieved with the tax reform approval in the first debate, but notes that it does not fully solve the financial problems facing the government.
In the debate last Friday, the representatives approved the file number 20.580, known as the tax reform law. The approval was optimistically received by the Costa Rican Union of Chambers and Associations of Private Business Sector (Uccaep).
"Public debt in terms of simple average for the Central American region will continue growing, reaching 43.1% of GDP in 2018, after having registered 42.5% in 2017."
The Central American Institute of Fiscal Studies (Icefi) estimates that for the current year the size of public expenditure of the Central Government in relation to the respective Gross Domestic Product of each country will be 21.4% in Costa Rica, 20.4% in El Salvador, 20% in Honduras, 18.4% in Nicaragua, 17.6% in Panama and 12.1% in Guatemala.
The proposal to increase the tax on interest on financial investments in Costa Rica could eventually make credit more expensive for both the private sector and the government.
In the view of the National Securities Exchange (BNV) it is worrisome that initiatives such as an increase in tax on income from financial investments are being discussed without knowing in detail and clearly the impact that something like this could have on the stock market and the country's financial activities.
At the end of the first quarter of this year, the financial deficit increased to 1.5% of GDP, up from the 1.3% reported in the same period in 2017, accompanied by a slowdown in tax revenues.
According to the Ministry of Finance "...The fiscal results at the end of the first quarter of March show, once again, the need to have a structural reform that allows increasing revenues and slowing down of growth in public spending, an objective sought by the Public Finance Strengthening Project."
The Government and the private sector have started negotiations to create a proposal for fiscal reform, which could include, among other things, changes aimed at achieving the financial sustainability of the Social Security scheme.
Without revealing details of the first sessions, the Higher Council of Private Enterprise (Cosep) reported that the reform negotiated with the authorities is focused on preventing insolvency of the Nicaraguan Social Security Institute and guaranteeing the country's economic growth.
The Costa Rican Congress has approved a fast track bill that would transform sales tax into a VAT of 13% and establish a 4% rate on the purchase of packaging, wrapping and raw materials, among other things.
The bill that could be approved by the Legislative Assembly also includes "... taxes on books in all their formats, air tickets, purchase of packaging and raw materials, as well as equipment and machinery (except if there is an express exoneration) and services for agricultural and agroindustrial production."
The good functioning of the institution in charge of collecting taxes is vital for ensuring economic development, as it means that honest companies who comply with their fiscal obligations are not at a disadvantage to those who don't.
EDITORIAL
In Costa Rica, better administrative management has made possible better income tax collection figures than those foreseen with simple tax increases.
In the opinion of the Central American Institute of Fiscal Studies, the only way to consolidate public finances in a sustainable way is to reduce tax breaks and increase tax collections.
From a statement issued by the Central Institute for Fiscal Studies (Icefi):
The Central American Institute for Fiscal Studies (Icefi) has proposed as a fiscal agenda for development: meeting the public demand for integrity and transparency; effective, efficient and effectual public spending as a tool for inclusive and democratic development; and financial viability with taxation being part of democratic accountability.
In Costa Rica the private sector claims that the Ministry of Finance is not telling the truth when it there is an essential need to create a register of shareholders under its control in order to comply with the OECD.
From a statement issued by the Costa Rican Union of Chambers and Associations of Private Business Sector (UCCAEP):
A bill to improve the fight against tax fraud authorizes the tax authorities to seize the assets and bank accounts of delinquent taxpayers, without a warrant from a judge.
An article in Nacion.com reports that the Technical Services Department of the Legislative Assembly has proposed a rule that "... could affect property rights and the privacy of individuals because it would allow Taxation officials to take possession of any money deposited in bank accounts, income from salaries and pensions. " and all this "... without a warrant, the Tax Administration would be able to seize assets and enter business establishments."
The average tax burden for the region is 13.4% of GDP, while the average public expenditure increased from 18.7% in 2013 to 19.2% at the end of 2014.
From the Introduction of the report Macrofiscal profiles in Central America, from Instituto Centroamericano de Estudios Fiscales (Icefi):
The fiscal situation has worsened in Central America in recent months, mainly due to a structural lack of sufficient resources to meet the needs of Central Americans and realize many of the commitments made by governments.
Discussion is being given to hiring an external company to provide consulting services in order to improve the management and collection of taxes.
The proposal which emerged from the leadership of former Finance Minister Pavel Centeno, is once again gaining strength at a time when the Tax Authority is analysing different alternatives to raising tax revenue.
The tax burden was placed at 10.9%, as a result of a tax proceeds of $5.912 million, 8.1% higher than in 2012.
Guatemala's fiscal deficit ended the year at 2.2%, below the Government's initial estimate of 2.5 %.
From a press release by the Ministry of Finance:
The Ministry of Finance reports that at the close of the fiscal accounts for 2013 has been completed and given results that demonstrate the efficient and sound management of fiscal policy. The deficit stood at 2.2% of GDP, a level that fosters macroeconomic stability and economic development. The delay in approving budget support loans and behavior of tax revenues represented adversities which were properly dealt with.