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GUATEMALA: A Tax Code by and for the Oligarchs?

Eli Clifton

WASHINGTON, Nov 23 2009 (IPS) - Taxation and government spending are the targets of a new report on Guatemala that argues the government is failing in its fiscal commitments to food, health and education.

The report, issued earlier this month by the Guatemala-based Instituto Centroamericano de Estudios Fiscales (ICEFI) and the United States- and Spain-based Center for Economic and Social Rights (CESR), attempts to tackle the difficult question of why Guatemala has experienced consistent levels of inequality and deprivation despite having the largest economy in Central America.

The decision to focus on government spending and taxation is a relatively new method of addressing human rights and development.

“I think looking at a budget as a human rights issue is fairly new and looking at taxation is an important element of a budget,” Ann Blyberg, director of IHRIP, which supports budget analysis by human rights groups around the world, told IPS.

“I know of efforts to look at taxation but looking at it from a human rights lens is newer,” Blyberg said.

Low levels of social spending – and failure to realise economic and social rights – are attributed to “the lack of political will by democratic governments to invest more in upholding those rights, and ensuring that resources reach the most vulnerable population”, said a statement by CESR and ICEFI.


A combination of a social budget that, as a percentage of Gross Domestic Product (GDP), is one of the lowest in the region and an inability to enact fiscal reforms has led Guatemala to its current situation of being unable to leverage its wealth into meaningful improvements in economic and social rights, the report says.

Guatemala exhibits some of the worst poverty in Latin America, with half of children under five suffering from malnutrition; one-third of children not completing primary school; and 290 women dying from complications in pregnancy or childbirth for every 100,000 live births.

Particularly, Guatemala has failed to address health, education and nutrition disparities along the lines of the lines of gender, ethnicity, socio-economic status and geography, finds the report.

It emphasises that in the context of Guatemala’s recent civil war – armed conflict ended in 1996 – addressing economic, social and cultural rights was a crucial component of the plans put forward for post-conflict stability and development.

At the time of the 1996 Peace Accords, both land and taxation reforms were identified as important steps to be taken, but vested interests have blocked these reforms for the past 13 years.

CESR and ICEFI claim that the failure of Guatemala to implement a “fair and progressive” tax policy violates the social and human rights of its citizens and has led Guatemala to fall behind on human development indicators – some indexes put Guatemala on par with sub-Saharan African countries.

“Guatemala has one of the lowest tax burdens in Latin America, as well as one of the most generous regimes of exemptions and tax breaks. The study attributes the low tax collection and expenditure to the state’s historic control by elite sectors of the economy,” say the report’s authors.

“This makes health, nutrition and education privileges of the few instead of universal rights,” said Ignacio Saiz, executive director of the CESR.

The report made several recommendations for how to improve Guatemala’s public spending and enact the tax reforms that have been promised since 1996.

The authors recommended an increase in public health funding to between 0.1 and 0.6 percent of GDP to ensure that universal access to health care is attained with a special emphasis on obstetrics and childbirth to reduce maternal mortality rates.

The CESR and ICEFI also advocated for the government to reduce discrimination in food security, nutrition and schooling by reviewing resources allocated to food and nutrition and design an education strategy to attract children who have been traditionally excluded from the school system.

To attain these improvements in the education system, spending should be raised from the current two-percent to 3.9-percent in 2010 and 4.5 percent in 2015.

The spending would need to be balanced with increased tax revenue, so the report recommends an elimination of tax privileges and a reduction in tax incentives – specifically targeted at the most powerful business sectors – to achieve an increased tax burden of at least 0.4 percent of GDP by 2010 and one-percent of GDP by 2014.

Reform of the existing tax code could include an increase of the income tax from its current five percent to nine percent and a strengthening of programmes against tax evasion, tax non-compliance and corruption.

“In Guatemala, there’s just a low tax rate,” said Blyberg. “If they tightened up their taxation in many countries they’d have more money to direct to social rights.”

The report also suggests that Guatemala may want to consider using loans as a viable mechanism for improving human rights conditions and funding education and health initiatives.

 
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