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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.
"Public debt in terms of simple average for the Central American region will continue growing, reaching 43.1% of GDP in 2018, after having registered 42.5% in 2017."
The Central American Institute of Fiscal Studies (Icefi) estimates that for the current year the size of public expenditure of the Central Government in relation to the respective Gross Domestic Product of each country will be 21.4% in Costa Rica, 20.4% in El Salvador, 20% in Honduras, 18.4% in Nicaragua, 17.6% in Panama and 12.1% in Guatemala.
In one of the regions that receives the least amount of taxes in the world, the tax burden remained relatively stable in 2017.
From the section Fiscal Outlook for Central America, from the report "Macro-fiscal Profiles: 9th edition", by the Central American Institute of Fiscal Studies (Icefi):
In 2017, the fiscal trajectory of countries in the region remained relatively constant with respect to what was observed in 2016.The following are highlighted as policy orientations: a) lack of political agreements, which transformed into a real impossibility of increasing tax revenues through tax reforms or strengthening the administrative capacity of tax administrations, and b) implementation of austerity programs, which in several countries had a greater impact on capital expenditures, in order to avoid an increase in the fiscal deficit and public sector debt.
The tax burden grew from 13.4% in 2013 to 14% in 2016, both due to the delayed effect of the tax reforms in Honduras and Nicaragua, as well as better management on the part of tax entities in Guatemala and Panama.
From the Regional Economic Report (IER) 2016-2017: Opportunities and challenges for Central America, by the SIECA:
In 2016 the size of the governments in the Central American countries grew very little, the tax burden reached 14.3%, and the average fiscal deficit was about 2.8% of GDP.
From the department of Fiscal Outlook for Central America, from the report "Macrofiscal Profiles: 7th Edition", by the Central American Institute for Fiscal Studies (Icefi):
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.
As in old fashioned patriarchal homes, if there must be suffering, the first to suffer are the stepchildren, and only afterwards, if necessary, the legitimate children.
EDITORIAL
The announcement by the Solis administration that it has a plan B in case it does not manage to get legislative approval for the proposed tax increases designed to address the serious and growing fiscal deficit, highlights the existence in Costa Rica of first class citizens and second class citizens.
The Executive Branch has returned to Congress the decree amending the basis for the first tranche of Income Tax considering that it compromises public finances.
From a statement issued by the President of Honduras:
Tegucigalpa, March 8. President Juan Orlando Hernández vetoed the decree amending Article 22 of the Law on Income Tax (ISR), which proposes exempting from the tax workers earning less than 15,087 lempiras ($700).
Very dark is the future of a country where the rulers do not lift their gaze beyond the few years of the mandate conferred on them by citizens.
EDITORIAL
The president of Costa Rica prefers short-term actions to address the fiscal crisis, while leaving open the tap of privileged public wages by which the future of the nation drowns through.
It is clear that immediate measures need to be taken such as reducing tax evasion and smuggling, and cutting abusive pensions. And it is quite possible that in order to maintain the rule of law taxes also need to be raised. But not closing, RIGHT NOW the growing cascade of state payroll costs that is multiplying every year, means mortgaging the future of the Costa Rican economy. However, president Solis postpones dealing with the topic, because its impact would be felt "only after 15 or 18 years."
"Fiscal accounts for 2015 anticipate an additional burden of concerns about the sustainability of the public finances of the governments of the region."
From a report entitled "Macrofiscal Profiles: 3rd Edition" by the Central American Institute for Fiscal Studies (Icefi):
The close of fiscal year 2014 has left more uncertainties than certainties in the current panorama for Central America.
The average tax burden for the region is 13.4% of GDP, while the average public expenditure increased from 18.7% in 2013 to 19.2% at the end of 2014.
From the Introduction of the report Macrofiscal profiles in Central America, from Instituto Centroamericano de Estudios Fiscales (Icefi):
The fiscal situation has worsened in Central America in recent months, mainly due to a structural lack of sufficient resources to meet the needs of Central Americans and realize many of the commitments made by governments.
Private sector urges the need for a national agreement to restrict state spending and fight corruption and tax evasion.
Eduardo Facussé, president of the Honduran Council of Private Enterprise (Cohep) states that the incoming government should convene a fiscal pact involving not only civil society but all sectors in the country.
"The pact should include restrictions on public spending, reducing corruption to the lowest levels, punishing criminals who erode the public purse, and punishing those who do not pay taxes," said Facussé to Latribuna.hn.
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."