Government promises more social spending as tax reform takes effect in El Salvador.
| Autor | Witte-Lebhar, Benjamin |
Despite an avalanche of objections from the country's business associations, conservative press outlets, and far-right political opposition, recently inaugurated Salvadoran President Salvador Sanchez Ceren has managed to push through a tax-reform package that targets wealthy contributors and carries the promise of a boost in social spending.
The new policies, which went into effect Sept. 1, introduce a minimum 1% tax on net assets for companies with annual sales of at least US $150,000 and a 0.25% tax on bank transactions (including money transfers and payments made with checks or credit cards) involving US$1,000 or more. The reforms also did away with an income-tax exemption that Salvadoran newspaper owners had enjoyed since 1950. The Sanchez Ceren administration expects the measures will together boost government coffers to the tune of US$160 million annually.
In addition, the government now has the authority to divulge the names of companies that refuse to settle delinquent tax debts. Sanchez Ceren, a former guerrilla commander who hails from the left-wing Frente Farabundo Marti para la Liberacion Nacional (FMLN), has said he will introduce further legislation giving those companies a 90-day grace period and exempting them from whatever fines and interest they have accrued. After that, however, the government expects all debts to be honored.
"It's like an act of good will toward the companies, so that they can free themselves from the millions of dollars worth of pressure and pay the state," the president said during a public appearance Aug. 23 in La Chacra, an impoverished community on the outskirts of San Salvador. "What the state cannot forgive is the capital debt, but we are going to forgive fines and accumulated interest."
The Asamblea Legislativa (AL), El Salvador's 84seat unicameral parliament, approved the measures three weeks earlier in a controversial late-night session during which the leading opposition party,
the hard-right Alianza Republicana Nacionalista (ARENA), walked out in protest--before the vote was held. The Partido de Concertacion Nacional (PCN) and Partido Democrata Cristiano (PDC), which have eight deputies between them, also abstained. Lawmakers from the FMLN and Gran Alianza para la Unidad Nacional (GANA), a conservative party formed several years ago by ARENA dissidents, decided to push through with the session regardless and, together with three deputies from minority factions, passed the new tax rules with...
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