Businessmen in Nicaragua denounced that because of the tax reform approved by the Ortega regime, the tax burden on imports of all types of beverages has tripled.
Representatives of the Nicaraguan Chamber of Industries (Cadin) explained that before the tax reform that was approved last February came into effect, importers paid the tax on the total cargo of beverages in each import, but now it was ordered that this must be applied on the retail price of each of these products.
The tax burden grew from 13.4% in 2013 to 14% in 2016, both due to the delayed effect of the tax reforms in Honduras and Nicaragua, as well as better management on the part of tax entities in Guatemala and Panama.
From the Regional Economic Report (IER) 2016-2017: Opportunities and challenges for Central America, by the SIECA:
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 line with recent warnings issued by other credit rating agencies regarding the country's bleak fiscal outlook, Fitch has reduced the debt rating from B + to B, and changed the outlook to negative.
From a press release issued by Fitch Ratings:
Fitch Ratings-New York-01 February 2017: Fitch Ratings has downgraded El Salvador's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'B' from 'B+'.
In 2016 the size of the governments in the Central American countries grew very little, the tax burden reached 14.3%, and the average fiscal deficit was about 2.8% of GDP.
From the department of Fiscal Outlook for Central America, from the report "Macrofiscal Profiles: 7th Edition", by the Central American Institute for Fiscal Studies (Icefi):
Arguing a significant increase in liquidity risk and political divisions that are preventing approval of an issuance of long-term debt, the rating agency has downgraded the rating and changed the outlook to negative.
From a press release issued by Moody's:
New York, November 07, 2016 -- Moody's Investors Service has today downgraded El Salvador's issuer and long-term debt ratings to B3 from B1 and assigned a negative outlook to the ratings, concluding the review for possible downgrade initiated on 11 August.
The countries facing the greatest risk of fiscal unsustainability within three years are El Salvador and Honduras, followed by Costa Rica and with less risk, Nicaragua and Panama.
From the "EconomicOutlook"section of the V Report on the State of the Region 2016:
From 2014 to 2015 the size of central governments remained constant at an average 18.5% of gross domestic product (GDP).
From the introduction of the report: "Macrofiscal Profiles: 6th Edition" by the Central American Institute for Fiscal Studies (Icefi):
2015 proved to be a period of low tax advance for the Central American region. On average, the size of central governments remained constant compared to 2014, at 18.5% of gross domestic product (GDP). However, not all nations maintained this trend in the same way. While the governments of Nicaragua, Costa Rica and El Salvador, some of the largest fiscally in the region, continued to increase their participation in the economy, reporting increases of 1.5, 0.7 and 0.7% of GDP, respectively, the Government of Guatemala - one of the smallest in the world became even smaller, being reduced by 1.2% of GDP. For its part, the Government of Honduras reported a small decrease of 0.2% of GDP, fully converged with its policy of fiscal austerity, while that of Panama had a transient contraction of 1.4%, reflecting a reorganization established by the new administration and that, according to the plans for 2016, will be reversed in full.
As in old fashioned patriarchal homes, if there must be suffering, the first to suffer are the stepchildren, and only afterwards, if necessary, the legitimate children.
EDITORIAL
The announcement by the Solis administration that it has a plan B in case it does not manage to get legislative approval for the proposed tax increases designed to address the serious and growing fiscal deficit, highlights the existence in Costa Rica of first class citizens and second class citizens.
After the dollarization in 2001 "... fiscal policy became the only tool the state could use to promote economic growth and improve living conditions for the population."
From a statement issued by the Central Institute for Fiscal Studies (Icefi):
Icefi reiterates the need for comprehensive tax reform
El Salvador, Tuesday, February 16, 2016
El Salvador - The Central American Institute for Fiscal Studies (Icefi), believes that El Salvador must seek political agreements that will pave the way for a comprehensive tax reform that addresses not only the solvency of the pension system, but the challenges in social welfare and the search for sustainable economic growth in the medium and long term.
While the Northern Triangle countries strive to reduce or at least maintain constant levels of debt / GDP, Costa Rica and Panama move further away from fiscal discipline, the former at the greatest pace.
From the introduction of a report entitled "Macrofiscal Profiles : 4th Edition." by the Central American Institute for Fiscal Studies (Icefi):
In the area of prioritizing economic stability over the availability of resources to finance development, the countries of the northern triangle in Central America, have generally shown a significant effort to reduce or at least maintain constant levels are Debt / GDP and the fiscal deficit, which means that, tacitly, the fiscal rule of zero growth of public debt is being used, despite the impact this may have on the welfare of the people.
Very dark is the future of a country where the rulers do not lift their gaze beyond the few years of the mandate conferred on them by citizens.
EDITORIAL
The president of Costa Rica prefers short-term actions to address the fiscal crisis, while leaving open the tap of privileged public wages by which the future of the nation drowns through.
It is clear that immediate measures need to be taken such as reducing tax evasion and smuggling, and cutting abusive pensions. And it is quite possible that in order to maintain the rule of law taxes also need to be raised. But not closing, RIGHT NOW the growing cascade of state payroll costs that is multiplying every year, means mortgaging the future of the Costa Rican economy. However, president Solis postpones dealing with the topic, because its impact would be felt "only after 15 or 18 years."
With the exception of improvements in Nicaragua and Honduras, in the rest of the Central American countries problems in public finances range from latent in Panama and already serious in Guatemala, to critical in Costa Rica and El Salvador.
From the report "Macrofiscal Profiles: 4th Edition" by the Central American Institute for Fiscal Studies (Icefi):
"Fiscal accounts for 2015 anticipate an additional burden of concerns about the sustainability of the public finances of the governments of the region."
From a report entitled "Macrofiscal Profiles: 3rd Edition" by the Central American Institute for Fiscal Studies (Icefi):
The close of fiscal year 2014 has left more uncertainties than certainties in the current panorama for Central America.
According to the ratings agency the political polarization that characterizes the Legislature which will take office on May 1 could hamper the implementation of the fiscal reforms that the country needs.
From an article by Fitch Ratings:
El Salvador's New Legislature May Yield Fiscal Restraint
Fitch Ratings-New York-23 March 2015: Gains by opposition parties in El Salvador's legislative assembly could result in a compromise to improve the sustainability of public finances but political polarization is likely to continue weighing on the prospects for growth-enhancing and security reforms, Fitch Ratings says.