Central American Taxes

While Guatemala's debate over raising revenues in these uncertain economic times through meaningful tax reform has been front and center in the country, the rest of the region's center-left governments are tackling similar challenges.  According to Presna Libre, the center-left governments are looking for ways to increase government revenue with higher taxes in order to finance a variety of social projects promised during campaign seasons.

In El Salvador,

the leftist government of Mauricio Funes is promoting a historic tax reform that will allow the government to increase revenue by 1 percent of GDP (240 million) to finance social programs next year and pay the debt.

In Guatemala, Colom's government

also urgently needs to increase revenues by at least 1.5% in Guatemala, where the tax burden represents 9.9% of GDP, far from 40 percent in the Scandinavian countries or 29% of Brazil.

Jonathan Menkos from the Instituto Centroamericano de Estudios Fiscales (ICEFI) says that Guatemala's elites believe that the government should be more concerned with lifting the tax burdens on businesses and individuals rather than raising taxes. For them, taxes only increase corruption and line the pockets of politicians and government officials.  

A progressive tax base that is less dependent on the regressive IVA (value added tax) would be a step in the right direction as would better ways of going after tax cheaters and bringing transparency to both government revenues and expenditures.  Some have gone as far to say that the failure on the part of the Guatemalan government to enact "a ”fair and progressive” tax policy violates the social and human rights of its citizens" (Guatemala-based Instituto Centroamericano de Estudios Fiscales (ICEFI) and the United States- and Spain-based Center for Economic and Social Rights (CESR)).