Discussion is being given to hiring an external company to provide consulting services in order to improve the management and collection of taxes.
The proposal which emerged from the leadership of former Finance Minister Pavel Centeno, is once again gaining strength at a time when the Tax Authority is analysing different alternatives to raising tax revenue.
For the second time the president of the Central Bank is proposing the elimination of bank secrecy so that cross-checks can be carried out in order to control tax evasion and increase tax revenues.
Just eight months ago, the president of the Central Bank insisted in Congress on the need to eliminate bank secrecy in order to minimize tax evasion and improve tax collection.
The technical redefinitions that make up a successful tax reform should be based on a reformulation of the social contract which establishes national goals.
Nacion.com reports that "According to Augusto de la Torre, Chief Economist at the World Bank, the fiscal debate is more than just an economic debate, it is almost a philosophical debate about the kind of state we want to have."
Both sides are discussing three articles of the Tax Update Law, but so far have failed to reach an agreement.
According to Andres Castillo, president of the Chamber of Industry of Guatemala (CIG), one of the items that is causing disagreement is related to the payment of income tax (ISR) on the tips received by service companies.
The second article concerns a payment that is made up of a 10% income tax on the interest on loans taken out abroad.
Two or more operations may be comparable as long as there is no economic difference between them that can affect the price of a good or service.
Jose Molina Calderon's article in Prensalibre.com reports that "for the purposes of determining a price or amount that can be agreed between independent parties in comparable transactions in conditions of free competition as referred to in Chapter VI of the Tax Update Law (LAT by its initials in Spanish), comparing the conditions of transactions between related persons other comparable transactions between independent parties.
The suits citing unconstitutionality presented in Guatemala against the tax reform have caused irrecoverable losses to government coffers.
The head of Collection at tax authority SAT said that " the reform does not only include income tax (ISR)" and noted that the Constitutional Court (CC), among other resolutions, suspended the collection of a 5% tax on the first registration of tractors (Iprima).
In 2010, when looking at total tax revenue as a percentage of GDP, Costa Rica has the highest ratio in Central America, and ranked fourth in Latin America, behind only Argentina, Brazil and Uruguay.
The study on Tax Statistics in Latin America, by the Organization for Economic Cooperation and Development (OECD), notes that while the ratio of tax revenue to GDP has been growing in Latin American countries, the average of the so called "tax pressure" is still below the average for countries who are members of the OECD.
Once publicized in the official newspaper, the new law passed by the Guatemalan Congress on 27th January, will take effect from February 25th .
The new law restores the higher tax rate on tobacco which had been removed last year and establishes special invoices for farmers, among other things.
Siglo21.com.gt in its publication reports, "The new law has 75 articles in which there are amendments to Value Added Tax (VAT), and taxes on land, sea and air vehicles. There are also reforms to the Tax Code, Law on Revenue Stamps and Stamped Paper Protocols, Law on Tobacco and related products, and finally a change to articles and their reforms in the Penal Code. "
Congress has restored a higher tax rate on tobacco, one that had been eliminated last year, and has decided to establish special invoices for farmers.
Guatemala's Congress has approved the so-called Anti-Evasion Act II, with 120 votes out of a total of 158, which, among other things, restores the higher tobacco tax rate, abolished in 2011.
With the elimination of this tax, the state has failed to collect Q20 million ($2.56 million) annually, according to an article in Siglo21.com.gt.
In January, the first Convention of Tax Information Exchange could be signed with Australia.
In order for this convention, and others are under negotiation, to be implemented, Congress needs to approve the banking secrecy law, which would allow access to accounts relating to tax matters, a requirement of the Organization for Economic Cooperation and Development (OECD).
Experts agree Alvaro Colom’s successor will face a difficult fiscal, economic and political situation.
First, it will be difficult to achieve the tax reform needed to tackle the decline in tax revenues which is set to continue into 2012. Ricardo Barrientos, Central Institute for Fiscal Studies (ICEFI in Spanish), also said that the losing candidate in the election will become the main opposition, and will complicate any reform attempts or approval of additional financing for the state.
The Peruvian Congress has passed a law which will raise the taxes on mining profits by six times its current value, equating to about $1,100 million annually.
The reform, driven by nationalist president Ollanta Humala, aims to reduce the high rate of poverty in the country which is rich in natural resources.
An Article in Reuters reports, "Peru's mining sector, the second largest producer of copper and silver, is vital to the local economy as it contributes to nearly 60 percent of export earnings."
If many large companies are granted tax exemptions for long periods of time, why not give the same exemptions to SMEs?
The analysis of the topic in an article in Laprensa.hn on the high rate of informality in microenterprises in Honduras, can be extrapolated to all Central American countries.
"Figures from the deputy minister for micro, small and medium businesses indicate that of the approximately 297.000 companies that fall under the micro category, 60% remain in the informal sector, mainly due to tax burdens they would have to face in order to take that step. "