High Taxes Create Informality

If many large companies are granted tax exemptions for long periods of time, why not give the same exemptions to SMEs?

Thursday, June 30, 2011

The analysis of the topic in an article in Laprensa.hn on the high rate of informality in microenterprises in Honduras, can be extrapolated to all Central American countries.

"Figures from the deputy minister for micro, small and medium businesses indicate that of the approximately 297.000 companies that fall under the micro category, 60% remain in the informal sector, mainly due to tax burdens they would have to face in order to take that step. "

"Although there is also concern among micro-businesses over compliance with other work obligations such as contributions to the Social Security fund and the minimum wage, tax obligations are the biggest concern."

"Although honorable, many businesses are afraid of paying taxes, the fear is that local authorities from the DEI will show up charging taxes and all their profits will be virtually diluted under these tax burdens," says Gunther Lainez, deputy minister of MSMEs at the Ministry of Industry and Trade.

"José Enrique Nunez, president of the Honduran National Association of Small and Medium Industry, ANMPIH, said his organization has been proposing that government authorities grant some tax benefits that would allow them to face the current difficult economic climate, as well as serving as an incentive for growth in an category that employs up to 70% of Honduran workers. "We are working with authorities to get a package of tax incentives to try to give compensation programs to MSMEs," says Núñez.

More on this topic

Honduran SMEs Request Incentives

September 2010

Micro, small and medium sized enterprises have asked the government to create financing incentives.

The proposal seeks to develop the sector and ensure growth in the micro enterprise sector next year.

José Enrique Núñez, president of the Honduran SME Association (Anmpih in Spanish), told Laprensa.hn that, "the proposal will incentivize the opening of the new market and generate an increase in companies' production, thereby creating jobs for many people".

Costa Rica: 6 Month Timeframe for Tax Exemption

August 2011

The new law taxing legal persons which was approved in first debate in the Costa Rica’s Congress, includes a 6 month grace period for MSMEs to exonerate themselves.

The companies classified as micro or small businesses, registered with the Ministry of Economy, Industry and Commerce (MEIC), have a period of six (6) months to process the new tax exemption.

10,300 New SMEs in Panama

August 2010

In the first seven months of the year 10,292 new micro, small and medium-sized enterprises (MSMEs) were registered, 126% more than in 2009.

Records held by the Panamanian MSME Authority (AMPyME in Spanish) show that most of the new companies were in the exports, services and agriculture sectors.

Exemptions for Tourism in Nicaragua

October 2012

Investments under $50,000 do not receive the tax benefits enjoyed by investors of larger amounts.

The Nicaraguan Chamber of Small and Medium Tourism Businesses (CAMTUR), has asked the Nicaraguan government to contemplate extending exemptions for investments in tourism to small businesses.

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