The productive sectors are pointing out the negative effects of the planned increase from 13% to 15% in Value Added Tax, and insist on the need to resolve the fiscal problem by cutting state spending.
According to representatives of the productive sector, an increase in Value Added Tax (VAT) will have a negative effect on the economy. For the food industry, the 15% rise could result in the closure of production plants and an increase in informality among businesses.
A bill that the government plans to introduce in the Assembly before the end of year includes transforming the sales tax and into a value added tax and gradually raising the rate from 13% to 15%.
This increase should be available within two years in order to "... stabilize the size of the gap between government debt and gross domestic product (GDP) from 2019 and safeguard macroeconomic stability. "
Federico Linares, CEO of G & T Continental, stated the need for fiscal reform.
Linares believes that current tax burden of around 10.5% of GDP is too low to support development of the country, adding that a tax reform is essential, though it seems difficult especially in an election year.
For now, he said, administrative measures can be taken to improve tax collection, like focusing on smuggling and tax evasion as well as lost VAT, which amounts to about $ 670 million.
New measures have been put in place to improve tax collection, among them electronic embargoes of banking accounts and properties.
At customs, the government revenue authority, known as SAT, will develop a program dubbed "Aduana Segura II" (Secure Customs II), a closed circuit of TV cameras overseeing entrance and departure of merchandise.
In an attempt to make it easier to pay taxes, SAT will start allowing credit card payments.
The decrease in tax revenue, mainly from value added tax and customs tariffs, have prevented the timely payments of the State’s obligations.
The elimination of the electricity subsidy payments, which affects those who consume in excess of 99 kilowatts, was a decision that was forced upon the Salvadoran government by the decline in revenues in the face of the economic downturn affecting the country.
The SAT lowered its tax collection goal for 2009 by $441.
For 2009, the Tax Administration Superintendent (SAT) in Guatemala had planned to raise $4.758 billion, but it reported yesterday that the target was adjusted to $4.32 billion, a decrease of 9.28%.
Prensalibre.com reported that the Finance Minister, Juan Alberto Fuentes Knight, addressed the impact on the fiscal deficit: "It would have to be covered by a decrease in operating expenses, plus donations and debt grants pending approval, but it is expected that the aforementioned deficit will remain at 2%."
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