Guatemalan Court Refuses To Suspend Controversial VAT Increase

by Mike Godfrey, Tax-News.com, New York

16 August 2001

Guatemalan labour leader Jose Pinzon said on Tuesday evening at a press conference that the country's Constitutional Court would reject the provisional suspension of the government's tax reform package, including an increase in Value Added Tax objected to by the unions.

He said the Court had notified them that the resolution confirming the VAT increase from 10 to 12 per cent, which went into effect on 1 August, cannot be suspended, but that the Court would grant a two-week period for both the legislative and executive branches and the plaintiffs to again present their arguments to back up their respective positions on the tax reform package.

Spokesman for the Court Walter Juarez told journalists that the Court will officially issue its resolution on the topic on Thursday 16th August given that Wednesday is a public holiday.

Spokesmen for the business sector have said that the tax reform, which includes measures targeting tax crimes and severe penalties for tax evaders and fiscal fraud, will be used to persecute businessmen who oppose the government. The fiscal reform also imposes increased and new taxes on a number of key economic sectors. This has led to general rejection by the country's powerful business leadership.

On 1 August, when the VAT increase went into effect, there was a strike by businessmen and street protests that ended in violent disturbances, resulting in more than 250 arrests and dozens of injuries.

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