Mar
Politics
Salvadoran Social Movement Calls for Fiscal Reform
Statement from the MPR-12 Alliance, (Popular Resistance Movement of October 12th), an alliance of Salvadoran social organizations that came together to resist the approval of CAFTA in 2005.
In El Salvador, Fiscal Problems are the Most Contradictory and Important to Address
Our country is in one of the most difficult moments with regard to our economic situation, public safety, vulnerability and the precarious living conditions of many sectors of the population. For member organizations of the MPR-12, behind these difficulties is the fiscal problem, due to inequality of the tax system that favors large companies who enjoy low taxes and are unpunished even though they practice tax evasion.
The fiscal problem, an explanation from those who are most affected, the poor and beaten
The new government inherited a bankrupt state from ARENA, without money, ransacked by official corruption and a high public debt (external and internal), but above all with a boundless social debt: 40 percent of the population lives in poverty and one third of our people have had to leave the country and live primarily in the United States.
ARENA converted El Salvador from a country of producers to a country of consumers. The ruling class plundered state assets through privatization, implemented the law of the jungle in the market, removing price controls and opening the borders to imports of subsidized products from other countries, which ruined national production; they dollarized economy to favor bankers and importers, and established a tax system that favors the rich and punishes the poor.
To support big business, the ARENA governments reduced the income tax on their earnings, from 35% to 25%, they removed the export tax on coffee, sugar and shrimp, they eliminated the estate tax (for property valued at more than one million colones), because of which, as an example, the State failed to receive U.S. $ 3.224 million between the period 1993-2009.
They also declared many employers, friends or sponsors of ARENA as tax exempt, such as investors in tourism, who have not paid even a penny of VAT, Income Fees, or municipal taxes since 2005. According to the Unit of Analysis and Monitoring of the Budget, from the Legislative Assembly, just from exemptions or waivers of taxes, the State failed to collect 9 billion dollars during the period of 2001-2009. In other words, the amount of money that the government could use to operate for almost 3 years.
All these privileges are compounded by the impunity that the large private companies receive, to evade taxes totaling about 1500 million dollars a year, as they evade 39% of the VAT, 59% of the income tax and 64% of other taxes. (Tariffs, FOVIAL and FOSALUD).
It is because of this unfair tax structure during the 20 years of ARENA governments that a huge debt (education, health, housing) has accumulated, because the State dispossessed of their most profitable businesses big business were endowed with a protective shell that makes them impune and fiscally untouchable.
Based on this we propose:
1. That the government develop and that the Legislative Assembly approve a true tax reform, to reverse the current system that ARENA created to benefit the rich. For example, a serious reform to the income tax on corporate profits, in accordance with the following table:
• 100 thousand to 1 million dollars: 25% tax on income.
• From 1 million to 2 million: 30% income tax.
• 2 million to 4 million dollars: 35% income tax.
• 4 million and over 40% of income tax.
2. From now on, apply Chapter 5 of the Penal Code to the big enterprises that evade taxes. The Penal Code reads: “… shall be punished with imprisonment of four to six years, when the evaded tax is applicable to income tax and the sum that is evaded is from three hundred thousand to five hundred thousand colones, and by imprisonment of six to eight years if the tax evasion exceeds five hundred thousand colones. ”
3. That the government of Mauricio Funes does not let ANEP (National Association of Private Business) blackmail them by threatening not to attend the Social Economic Council when tax issues are discussed. The government must rely on the people who put the government where it is, and trust in the people in the case of destabilization caused by the right. Large business owners are enemies of the people and the large business owners want the government to fail so that ARENA can regain power.
