According to the ICEFI, "tax incentive policies seem to be a lost opportunity because of permanent tax expenses and the lack of tangible social benefits."
From a statement issued by the ICEFI:
Within the framework of the international meeting on Tax Justice and Transnational Fraud, held in Costa Rica, a study was presented on October 20 entitled 'The effectiveness of tax incentives for investment in Central America' in which an analysis was undertaken of the Central American experience in investment attraction through tax incentives.
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.
The 50 companies already operating at Tocumen's airport facilities will be able to access free trade zone incentives if the request made by the administration of the terminal is approved.
The documentation was submitted to the National Commission of Free Zones at the Ministry of Trade and Industry (MITI), and there will be a 30 day period to review and approve the application.
The problem with income tax exemptions is that they favor high-return projects that would probably have been made anyway.
From an IDB document entitled "The effectiveness of tax incentives: The case of export processing zones in Costa Rica, El Salvador and the Dominican Republic".
Introduction and Summary
Policies encouraging investment make use of a variety of instruments.
In the view of entrepreneurs, insecurity is still the main factor preventing the arrival of larger flows of foreign direct investment to the region.
Despite the benefits and incentives of all kinds offered by governments to encourage the establishment of foreign companies in Central America, as long as violence and insecurity is not tackled in a more effective manner, investment flows will continue to dwindle.
The competitiveness of a company and its product does NOT depend only on taxes but also on the cost of materials, labor and energy, and quality of its management.
Editorial
In an analysis of the issue Reny Marianne Bake notes that "... in the seventies and eighties of the last century ... as good merchants, American car producers and labor unions lobbied their politicians, seeking state protection, not wanting to compete.