CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Honduras Low-Tax Cities Hit Legal Hurdle

Honduras Low-Tax Cities Hit Legal Hurdle

by Ulrika Lomas,, Brussels

11 September 2012

The Honduras government has confirmed that it has entered into a memorandum of understanding with a private business consortium, NKG, to develop the first in a series of low-tax 'charter cities', although the project has already encountered strong opposition, resulting in a legal challenge to the plans.

Each of the three new cities proposed will be permitted to operate separately from the state, with their own regulatory, legal and tax systems, as part of plans to spur foreign investment, cut unemployment, and foster economic development in one of the world's most impoverished nations.

The plans have been drawn up and approved by the nation's Congress in less than a year, with the support of a US economist, Paul Romer. The government is keen to emulate the success of business-friendly territories such as Hong Kong and Dubai, which boast successful international financial centres, supported by low taxes and robust, business-friendly regulation.

Doubts have been raised however about the feasibility of carrying out the proposals with only modest investment secured from the government's first private sector partner NKG, which has agreed to invest USD15m into the first of these 'charter cities', which is likely to be located on the Caribbean coast near Puerto Castilla.

However, in a country that suffers from high crime rates, widespread poverty and political instability - most recently experienced in 2009 when the government was overthrown - domestic opposition to the proposals is massing on concerns of their potentially destabilizing impact.

Honduras had planned to appoint five international experts, including Romer, to head a transparency commission, to ensure that the necessary safeguards are in place to protect Honduras and its workforce, and to enforce good governance. However, in a statement published online, Romer sought to clarify that the group had not been involved in the the latest agreement with NKG, confirming that a decree formalizing their appointment and the establishment of the commission had not been published in the nation's Official Gazette, due to the Honduran Supreme Court considering a challenge to the constitutionality of the law permitting the creation of the Special Development Regions.

"Thus the conditions have not existed to permit the Transparency Commission to play the role envisioned for this ambitious and important project," Romer clarified in an online statement.

TAGS: court | tax | investment | business | law | international financial centres (IFC) | offshore | unemployment | regulation | Honduras

To see today's news, click here.


Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »

Stay Updated

Please enter your email address to join the mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.

To manage your mailing list preferences, please click here »