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False Start For Guatemalan Tax Reform, Reports IMF

by Mike Godfrey, Tax-News.com, Washington

23 September 2014


The International Monetary Fund (IMF) has suggested that Guatemala look to prop up its revenue base, after the private sector scuppered the Government's attempts to raise more revenue in 2013 and 2014.

The 2012 tax reform package faced many obstacles, including numerous claims before the Constitutional Court, reflecting the long-standing reluctance by influential sectors to accept a higher tax burden, the IMF said. While the Government was eventually successful, collections were lower than anticipated.

The reform has so far yielded only about 0.25 percent of gross domestic product (GDP) in extra revenues, compared with a target of between 1 and 1.5 percent of GDP during 2013-2014.

Guatemala has introduced a number of measures, including broadening the base of the corporate and personal income taxes, eliminating several value-added tax (VAT) exemptions, increasing vehicle taxes, and streamlining customs duties. The IMF said further measures may now be necessary, including initiatives to bolster tax and customs compliance.

The IMF advised the Government to reduce tax expenditures, and to align VAT rates with those in place in nearby countries to fund additional spending on health, education, security, and infrastructure.

TAGS: compliance | VAT rates | tax | vehicle tax | gross domestic product (GDP) | International Monetary Fund (IMF) | education | Guatemala | tax reform

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