_-_copia.jpg?w=800&resize=800,500&ssl=1 "Tax Justice Law")
The deliberation over the Tax Justice Law in Honduras has sparked significant discussions among the private sector, trade organizations, and government officials. The tax reform initiative, backed by the present administration, has been marked by business leaders as a direct risk to job security and the ongoing presence of numerous businesses within the nation. The primary worry is the removal of tax incentives that have been crucial for the growth of industries such as manufacturing, agricultural exports, tourism, and construction, which, according to business figures, could lead to a surge of shutdowns and widespread layoffs, particularly in small and medium-sized businesses.
The anticipated effects of the reform are not confined to the commercial sector but also affect Honduran household finances and societal structures. Experts and labor union representatives caution that the decline in economic activity, along with the exodus of businesses, might result in a rise in long-term unemployment, an increase in informal work, forced emigration, and a downturn in local purchasing. The current nationwide conditions worsen this outlook, as over a million individuals seek adequate employment and informal work impacts a large portion of the populace.
Consequences of removing tax benefits and the threat to jobs
The Justice Tax Law entails the removal of exemptions and relief in the taxation system, impacting over ten key industries, such as free trade zones, the tourism sector, sustainable energy, and production industries. As per information from the business community, these setups are crucial for over 400,000 direct jobs and exceed a million indirect jobs, primarily within agricultural and industrial sectors, as well as in the export market. The discontinuation of these benefits might result in the shutdown of factories, workshops, retail outlets, and farms in both city and countryside areas, displacing numerous Hondurans from formal employment and increasing the burden on the informal job sector.
An analysis by the Honduran Council of Private Enterprise (Cohep) indicates that the tax reform would have a negative impact on sectors such as tourism, manufacturing, and agribusiness. For example, in the manufacturing industry, an estimated 40,000 jobs and more than $733 million in exports would be at risk, while in tourism, the impact could represent the loss of thousands of direct and indirect jobs and a significant decline in investment and wages. In addition, increased operating costs, especially for micro, small, and medium-sized enterprises, would make it impossible for them to remain in the market, which would exacerbate unemployment and underemployment in the country.
Social consequences and alternative proposals from the private sector
The reform is expected to have a lasting social impact, with the potential to worsen poverty levels, lead to forced migration, and create widespread distrust both within the country and abroad. The expansion of the informal economy and the decline in formal employment with social benefits could harm living standards and reduce tax revenues, impacting all the people of Honduras. Business leaders are worried about its ripple effect on societal stability, cautioning that job losses could deepen the nation’s poverty.
In light of this situation, the business community has come up with alternatives, such as lowering the value-added tax (VAT) from 15% to 12%, aiming to leave more funds with the citizens of Honduras, boost economic growth, and create jobs. Furthermore, they propose that instead of removing incentives across all sectors, inspections and audits should be conducted on tax-exempt entities that engage in irregular activities, utilizing the authorities already provided by existing laws. The private sector emphasizes the importance of engaging and consulting with all economic stakeholders before endorsing a reform that might have lasting effects on the country’s economic and social progress.
The discussion around the Tax Justice Law remains fervent, with pressing appeals for the National Congress to carefully examine the law’s provisions and prevent choices that could exacerbate Honduras’ fundamental challenges, like unemployment, poverty, and migration.
