World Bank Supporting Guatemalan Tax Grab

by Mike Godfrey, Tax-News.com, Washington

03 July 2014

Guatemala has secured a USD340m loan from the World Bank to support the government's efforts to strengthen tax administration and fiscal policy.

The loan will also help the country improve budget management and public spending, as well as the management and coordination of social policies. It has a maturity of 25 years and a grace period of 10 years.

New initiatives under the loan-supported program include enhancements to the organizational structure of the tax administration superintendence (superintendencia de la administracion tributaria, SAT), and the creation of a department of international taxation within the ministry of finance (ministerio de finanzas publicas, MINFIN).

Under the program, Guatemala aims to increase the amount of revenue generated by income taxes to 3.2 percent of gross domestic product (GDP) by the end of 2014, from 2.7 percent in 2011. It will also strive to increase the number of taxpayers making direct payments to the SAT by at least 10 percent from 2011 to 2014.

Fitch Ratings recently downgraded Guatemala's credit rating from BB+ to BB with a stable outlook, due partly to lackluster results from a tax reform intended to raise revenue by one percent of GDP in 2013.

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