In this regional context of economic crisis, falling fiscal revenues and increasing public debt, Costa Rica's debt level is expected to rise to 75% of GDP by 2021, and in the case of El Salvador, the indicator could exceed 85%.
The outbreak of covid-19 in Central America forced the government to declare severe household quarantines and to restrict several economic activities, restrictions that in some cases are still in place after five months of health and economic crisis.
The Guatemalan Chamber of Commerce opposes the special tax scheme for agricultural activity approved by Congress, arguing that it is unconstitutional and violates the principles of tax equity.
The new fiscal regime for agriculture, approved last September 24 by the deputies of the Congress of the Republic, has been surrounded by controversy, as from the beginning the chambers of industry and commerce expressed their opposition.
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.
Arguing that the economy reports stable growth, and that a prudent management of monetary and fiscal policy has been made, the agency decided to maintain in Ba1, with a stable perspective, the country's credit rating.
The low fiscal deficit caused by strict controls on public spending and reduced indexes of public indebtedness, as well as a demonstrated economic resilience to extra-economic events, are other of Moody's arguments.
Insufficient resources to finance public spending and the accumulation of outstanding tax credit repayments are some of the problems that the government will face in Guatemala in 2020.
According to the Central American Institute of Fiscal Studies (Icefi), the new government should make an important effort to improve the effectiveness of the Superintendence of Tax Administration, since the percentage of non-compliance with Value Added Tax (VAT) has been growing since 2012 and the percentage of income tax and other taxes is unknown.
"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.
Like lemmings running towards a cliff, Costa Rica repeats the kind of actions that underscore the definition of a society incapable of stopping on the road to a terminal crisis.
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 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.
EDITORIAL
In Costa Rica, better administrative management has made possible better income tax collection figures than those foreseen with simple tax increases.
With legislative approval of an Agreement on Mutual Administrative Assistance in Tax Matters, the country has avoided the risk of being included in the list of non-cooperating countries.
From a statement issued by the Ministry of Finance:
May 23, 2017.The ratification of the Convention on Mutual Administrative Assistance in Tax Matters (Law Initiative 5200), ratified by the Congress of the Republic, constitutes an important step for the country as a step toward transparency in the exchange of fiscal information with other countries as a important aspect of the global agenda for development.
The government is warning that if the agreement on Mutual Administrative Assistance in Tax Matters is not ratified, the country is at risk of being included in the lists of non-cooperating countries.
The Guatemalan Ministry of Finance describes as "indispensable" the ratification by legislative of the Convention on Mutual Administrative Assistance in Tax Matters adopted by the Council of Europe and member countries of the Organization for Economic Co-operation and Development (OECD)
In 2016, the ratio between total expenditure of central governments of the countries of the region and GDP remained almost unchanged from the previous year, going from 18.3% to 18.6%.
From the report "Macroeconomic Profiles: 8th edition", from the Central American Institute of Fiscal Studies (Icefi):
The Central American Institute for Fiscal Studies (Icefi) presented its most recent edition of the Macro-Fiscal Profiles of Central America, which contains an analysis of the fiscal situation of Central America and each of the countries of the region, at the end of fiscal year 2016, as well as the main lines contained in the budgets approved for 2017.The publication includes in this opportunity a revision to the main indicators related to the fulfillment of the Sustainable Development Objectives 2030 -ODS 2030- and raises the urgent need to make progress in a new fiscal agenda that allows the effective attention of these commitments in the short term.
"Structural weaknesses will continue to constrain Guatemala's economy and credit rating over the medium term"
From a press release by Fitch Ratings:
Fitch Ratings-New York-31 March 2017: Structural weaknesses will continue to constrain Guatemala's economy and credit rating over the medium term, says Fitch Ratings. Guatemala's growth rate will rise during 2017 as the effects of the 2015 political crisis gradually fade.
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):
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