In order for Guatemalan producers to compete under the same conditions as neighboring countries, the government is preparing a bill that seeks to exempt agricultural inputs from VAT.
The initiative, known as the "Fiscal Equity Law", is being prepared by the Ministry of Agriculture, Livestock and Food (Maga), because, according to the institution's top official, other Central American countries do not charge value-added tax (VAT) on agricultural inputs.
In Guatemala, Congress is discussing a bill that seeks to increase the arrival of flights to the country through tax incentives for airlines, which would be coupled with the elimination of improper tax charges.
On August 14, 2019, the President of the Legislative Branch, Álvaro Arzú Escobar, presented to Congress initiative 5585, which has the support of the International Air Transport Association (IATA), the Latin American and Caribbean Air Transport Association (ALTA) and the Guatemalan Association of Air Lines (AGLA). See full bill.
The Guatemalan Congress approved a bill that contemplates the creation of a special tax regime for agricultural activity.
Although this bill was involved in controversy days ago, as the chambers of industry and commerce expressed their opposition, Congress decided to approve the bill. See full bill.
In Guatemala, the chambers of industry and commerce oppose the bill that proposes to create a special tax regime for agricultural activity.
The project "Law on Simplification, Updating and Tax Incorporation", which has been in Congress for more than two years, was scheduled for final discussion until September 10. See full bill.
The first disbursement of $8 million has been made for forest recovery, restoration, management, production and protection in Guatemala.
The first payment made by the National Forest Institute (Inab) and the Ministry of Public Finance will be allocated to 4,129 projects, corresponding to 33,200 hectares of low-management forest.
A bill proposes "guaranteeing stability in the customs area of royalties and municipal ordinances, with a period of 5 to 20 years, depending on the amount of the investment."
From a statement issued by the Congress of Guatemala:
Deputy Luis Fernando Montenegro, of Encuentro por Guatemala, presented to the Legislative Directorate a measure called Legal Stability, as a tool of the State of Guatemala to promote private investments, whether they be national or foreign.
A draft bill proposed by the Executive includes the exemption for five years from import tax on goods needed to start development of tourism projects.
The bill that has been promoted by the Inguat since last year includes several incentives such as tax exemptions and others, but it has not yet been agreed with companies in the tourism sector.
The high logistic costs and the appreciation of the Quetzal against the dollar are two of the factors which, according to exporters, have prevented better performance from being achieved in recent years.
According to Agexport, exports of Guatemalan agricultural products in the last 6 years have registered very low growth, going from $2.96 billion in 2011 to $3.2 billion in 2016.In the same period, non-traditional agricultural products which registered a decrease were peeled sesame seeds (-14%), frozen peas (-6%), broccoli (-47%), frozen beans (-35%), tomatoes (-35% %), potatos (-48%), and mangos (-3%), among others.
In 2016 exports from the free zone regime fell by 4% compared to 2015, and those from companies covered under the maquila incentive law, fell by 6%.
The negative results in foreign sales of companies operating under one of the two incentive schemes is due in part to the departure of several companies from the free zone regime, having been affected by the Emergent Employment Act.
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.
A bill prepared by the Guatemalan Institute of Tourism proposes giving tax benefits to companies investing in the areas of Izabal, Las Verapaces, and Petén.
INGUAT director Jorge Mario Chajón told Elperiodico.com.gt that"... it is an initiative that is still under discussion, but aims to address problems in the departments' which have been abandoned for a long time and do not have any developed tourist infrastructure'."
The formal closure of 15 companies in free zones has been reported from October 2015 to date and sixty other users have already suspended their operations.
The problems facing the free zone regime have not stopped increasing since the Emergent Law for the Conservation of Employment came into force, which eliminates tax exemptions which used to benefit companies operating under the free zone regime.
It has been reported that one of the 17 free zones operating in the country has started the process of closing its operations entirely due to the legal uncertainty generated by the emergent employment law.
Companies operating in free zones have spent several months denouncing the serious situation they have faced since the Emergent Act for the Conservation of Employment was implemented, instead of encouraging investment and job creation, it has become a good example of how to discourage investment in a country.
The application of Article 27 of the Emergent Conservation of Employment Act has put on tenterhooks the feasibility of permanence in the country of 125 companies operating in the free zone.
An article on Prensalibre.com reports that "... the Emergent Conservation of Employment Act , in force since March 31, 2016, specifies that 43 activities can not be produced or marketed and developed from free zones, including pharmaceuticals, cosmetics, plastics and machinery, among other things. "
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.