Tax-administration privatization initiative causes controversy.
| Autor | Reynolds, Louisa |
With tax revenue repeatedly falling below targets, President Otto Perez Molina has argued that privatizing Guatemala's tax-collection system, which has the highest overhead costs in Central America, is the only way to achieve greater transparency and efficiency. However, his privatization plan has been mired in corruption allegations since the local media exposed that he had held talks with an Argentine company that would allegedly receive a lucrative contract to modernize Guatemala's tax-collection system long before the public bid was announced.
As a result of the scandal, the tax authority's directors rejected Perez Molina's privatization initiative, which provoked the president's ire and led him to announce on June 21 that they would be sacked and replaced. The issue has tarnished the government's image and reinforced perceptions that President Perez Molina has an authoritarian approach to leadership.
Guatemala's chronic fiscal-revenue shortfall, which totaled US$78.8 million by the end of May, has led to concerns that the country's tax authority (Superintendencia de Administracion Tributaria, SAT) will be unable to meet the US$6.6 billion tax-collection target needed to fund this year's budget, which would pose a serious threat to public finance a year before general elections are scheduled to take place.
As well as being ineffective, Guatemala's tax-collection system is the most expensive in Central America. The Instituto Centroamericano de Estudios Fiscales (ICEFI), a local think tank, says SAT spends 2.3% of the yearly tax revenue collected on administrative costs, whereas, on average, its regional neighbors spend 1.4% (Panama spends as little as 0.5%), which would appear to bolster Perez Molina's argument that privatization is the only way to achieve greater efficiency. Privatizing the tax-collection system has been in the cards for a number of years and had already been discussed by the Congressional Commission on Public Finance, under the previous Unidad Nacional de la Esperanza (UNE) administration.
On June 11, SAT's board of directors passed a resolution (Dictamen DCC-SAT-045-2014) authorizing SAT Superintendent Carlos Munoz to issue a call for tenders. However, after the local media published evidence that the government
has held talks with Argentine firm Kolektor since 2012, that the company paid for SAT employees to travel to Argentina to take part in training courses, and that SAT had paid Kolektor's CEO's travel and...
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