Tax Reform creates tension between the government and Honduras' private sector
On March 8, government officials met with representatives of Honduras’ private sector to discuss a tax reform project known as the Tax Fairness Act. The bill would eliminate 10 of the 18 tax exemptions in the Honduran revenue code and would increase efforts to prevent tax evasion.
The Honduran Council of Private Businesses (COHEP) stated that the bill would drastically impact private investment in the country. But, the Castro administration claims that these changes are necessary in order to prevent Honduras from becoming a “Tax Haven”.
According to the Castro Administration, the state has lost 60 billion Lempiras (2 billion USD) in just 2022 from tax exemptions and evasion. In 12 years, it is estimated that Honduras has lost 451 billion Lempiras (18 billion USD) from tax exemptions given to large corporations.
The administration has launched a public campaign to promote the tax reform project and members of Xiomara Castro’s cabinet have appeared in multiple news outlets explaining its goal. In an interview with the minister of communication, Marlon Ochoa, claimed that the “tax structure inherited from 12 years of governments at the service of the elites is a living memory of dispossession.” The administration is promoting the project as a systematic change that would “reverse Honduras’ privilege system”.
In the meeting between the government and the private sector, the private sector completely rejected the content of the project. Representatives of the private sector called the reform project “dangerous" and expressed their discontent with the approach of the government.
In a press conference, the director of COHEP, Armando Urtecho, explained that the Honduran people should be “serious and responsible when considering a tax fairness act that has nothing to do with fairness.” He explained that the approach of the government comes from an ideological standpoint and with a satirical tone called on the government to simply ban private investment. “It would be easier to issue a decree that simply says ‘prohibits private investment in Honduras… just like Nicaragua did” explained Urtecho.
Members of the private sector also pointed out that tax reform would not help much if there is corruption and mismanagement of funds. The president of COHEP, Mateo Yibrin explained that the private has insisted on the establishment of the International Commission Against Corruption and Impunity in Honduras (CICIH) in order to secure the proper usage of funds. “We are not going to give the government more money, with the argument that we are eliminating injustice, so they can continue wasting it” explained Yibrin.
In response, the government officials pointed out that the government has not had any accusations of corruption so far and is currently working hard to establish the CICIH.
The debate surrounding Honduras’ tax reform project is currently centered on investment, corruption, and the national budget.
Economist Rafael Delgado explained that there is a “terrible problem” with the concept of foreign investment in Central America and it would be a mistake to focus solemnly on the impact that tax reform would have on the private sector. Delgado made it clear that tax exemptions do not always reflect better job opportunities and economic growth since companies tend to find ways to limit their economic contribution in the area.
🌎 Read here to learn more about President Xiomara Castro's tax reform proposal (In Spanish)
|
