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Guatemalan Tax Reform 'Vital' To Expand Tax Base

by Glen Shapiro, Tax-News.com, Washington

31 August 2016


The success of the proposed tax increases that the President of Guatemala introduced to Congress hinges on overcoming likely court challenges, as well as the success of the ongoing reform to the country's tax authority, Fitch Ratings has said.

The Government expects the tax proposals to raise GTQ5.8 billion (USD770m, or 1.1 percent of GDP) by increasing the corporate tax rate to 29 percent from 25 percent, raising some mining royalties to 10 percent from one percent, and hiking cement and fuel distribution taxes. It would also raise personal income taxes, which will be partially offset by allowing tax payers to submit VAT receipts for income tax deductions.

"We believe these tax increases would help address the sovereign's persistently low government-revenue base and increase resources to meet the country's social and infrastructure demands," Fitch Ratings said. "Guatemala's ratio of general government revenues to GDP is below 11 percent, among the lowest of all rated sovereigns."

The agency noted that the Government has failed to meet its tax targets for each of the last four years. "Tax revenues were almost one percent of GDP below target in 2015 due to problems at the Superintendenca de Administracion Tributaria, as well as lower revenues from the oil and mining sectors and a court decision that struck down a telecom tax."

TAGS: court | tax | value added tax (VAT) | mining | royalties | tax authority | Guatemala | Tax

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