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CENTRAL AMERICA |
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Guatemala President Faces Tough Fight On Tax
Reform
By Sarah Grainger
GUATEMALA (Reuters) - Guatemalan president
Alvaro Colom is pushing for a fiscal reform
package to boost dwindling finances needed
to fight high crime and poverty, but stiff
opposition threatens to kill the plan.
Colom, a center-leftist, has pledged to
release the details of the proposal in
coming weeks. Analysts say the president is
likely to propose an increase in income tax
rates and ways to get more people paying
taxes.
"We are all going to have to make sacrifices
because we can't allow the economic
situation and the fall in tax receipts to
stop the state from functioning," said Mario
Taracena, a congressman from Colom's
National Unity for Hope Party, or UNE.
Guatemala has one of the lowest rates of tax
collection in Latin America.
Rating agency Standard & Poor's cut its
outlook on Guatemala's "BB+" debt rating a
year ago to "stable" from "positive," citing
weak growth and tax collection.
This year, Guatemala's economy has slowed
sharply because the global recession has
crimped demand for exports like textiles.
Further weakening the economy, Guatemalans
living in the United States are sending less
money home after losing their jobs or
getting deported.
Tax collection in Guatemala, which also
exports sugar and coffee, could fall 8.5
percent this year, the finance ministry said
in September.
Despite the fiscal problems, Colom could
have trouble getting fiscal reform passed by
Congress, where his party lacks a majority.
"We think the government needs to focus on
correcting its investments, reducing costs
and being more transparent, before we talk
of fiscal reform," said Alejandro Sinibaldi,
a congressman from the conservative Patriot
Party.
A previous attempt by Colom to pass fiscal
reforms failed in August amid criticism from
companies opposed to higher taxes.
Colom came to power in January 2008
promising to reduce poverty and crack down
on drug trafficking and street crime. But
violence has risen since his inauguration,
with more 6,000 murders a year in a country
of 13 million.
"If they don't pass this fiscal reform I
doubt they'll have much success in
addressing a lot of the problems they have.
They're not going to be able to fight
organized crime and drug cartels without
funds," said Heather Berkman, an analyst at
the U.S.-based Eurasia Group.
The Guatemalan finance ministry expects a
budget deficit equivalent to 3.1 percent of
gross domestic product in 2010, even though
the government has proposed cutting overall
spending that year by 3.7 percent. |
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