In this scenario of economic crisis, falling tax revenues and the need to finance recovery programs, in Guatemala and Costa Rica it is already proposed to increase current taxes and create new ones.
Guatemalan authorities are already beginning to discuss the fiscal policy they will apply in 2021, when the economy will have to face the effects of the economic crisis generated by the covid-19 outbreak.
The Legislative Assembly approved in second debate a bill that aims to tax in the country the sale and self-consumption of imported or locally produced cement.
The initiative, which was approved in the first debate in the Assembly in mid-February and is still pending approval by the Executive Branch, establishes that the tax will be on imported cement produced nationally, in bags or in bulk, for sale or self-consumption, of any kind, whose destination is the consumption and marketing of the product nationally.
In Nicaragua, authorities reported a decision to suspend collection of the additional fee of $0.05 for each kilogram exported or imported by air.
The extra charge came into effect last April 25, but from the beginning the private sector spoke out against it, because it was argued that the tariff that the Nicaraguan government would apply, would put some local companies on the border of closure and cause a decrease of about $50 million annually.
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.
On average in Costa Rica more than one in five companies classified as Large Taxpayers do not pay taxes.
EDITORIAL COMMENT:
When the Tax Department does not fully complete its duties, competition between companies is settled not by the quality of products or services, or for the excellence of its managerial staff and their strategic direction, but for the ability of their tax advisors to reduce the amount of taxes paid.
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. On the one hand, there are reductions in the tax burden on companies, such as development loans, import protection and export subsidies and, on the other hand, government measures aimed at correcting information externalities or coordination problems that may prevent a company from accessing new markets or developing new technologies by itself.
In the region the level of sales tax evasion is around 33% on average.
From a statement from the Central Institute for Fiscal Studies (Icefi):
The Central American Institute for Fiscal Studies presents the seventh edition of its analysis of the situation in Costa Rica.
Icefi: It is urgent that the two contending political parties specify a plan that will allow them to balance fiscal accounts and fulfill their campaign promises.
Tax revenues in relation to GDP increased in the Central American countries with the exceptions of Guatemala, where it fell, and Costa Rica, where it did not change.
A report entitled "Tax Statistics" prepared by the Organization for Economic Cooperation and Development (OECD), analyzes the behavior of tax collection in Latin America.
Central American companies on average spend 217 hours and perform 34 different procedures in order to comply with the payment of taxes.
Even though the process for paying taxes are slower than in other regions, the overall tax rate paid by corporations in Central America is still lower than in other countries.
They undermine the principle of tax justice and the morality of honest taxpayers, hindering equal competition and promoting impunity.
From a statement by the ICEFI:
Guatemala, June 14, 2013
- The approved decree contains a greater amount of tax amnesty, in which benefits are given to delinquent taxpayers and those who have operated at unfair advantage over those who pay their taxes correctly and on time, even aggravating the negative consequences of the tax amnesty applied in 2011. This action violates the principle of tax justice and the morality of honest taxpayers, constituting an obstacle to a desirable climate of competition on equal terms, clear rules and ones which combat impunity.
The Organization for Economic Cooperation and Development wants to prevent schemes that allow using different jurisdictions in order to avoid paying tax where the activity is being carried out.
An article in DF.cl reports that "The Organization for Economic Cooperation and Development (OECD) has prepared a report, commissioned by the G20, which will be presented in early February to launch changes in international tax regulations that prevent multinationals from exploiting loopholes in order to pay very little tax by declaring profits in tax havens. "
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