The Chamber of Textile, Clothing Companies and Free Zones states that if the new law on Free Zone included the tax, it would drive away millions of dollars in investments.
Elmundo.com.sv reports that "The Chamber of Textile, Clothing Companies and Free Zones of El Salvador (Camtex) on Wednesday opposed changes made by the Finance Minister Carlos Cáceres to the proposed amendments to the Law on Free Zones, agreed with the sector since October 2011."
If a reform of the law is approved, tax exemptions enjoyed by members of the scheme would be limited.
Although the purpose of the law reform is to modernize the free zones scheme and meet the requirements established by the World Trade Organization, companies currently operating under the scheme would be affected.
One of the proposed changes is the elimination of unlimited tax exemptions based on export performance, which up until now has applied to all companies in free zones.
There is a growing demand for textiles and clothes manufacturing, but a new Law on Free Zones is needed in order to bring fresh investments to this sector.
The World Trade Organization (WTO) has determined, after two extensions, the country should, in 2015, replace the law that has been in force since 1998, which grants tax benefits such as a total and permanent exemption from taxes, among others.
By 2015, the country must eliminate those benefits granted to companies operating under the Free Zone regime.
The country committed to do so at the World Trade Organization, and could face lawsuits by other countries if it does not comply.
The privileges granted to these companies include paying neither income tax nor municipal obligations.
“Mario Róger Hernández, Economy vice minister, said last week that the government will hold talks with businessmen to land an agreement before the 2015 deadline”.