LatinNews Daily - 20 March 2023

HONDURAS: Tax reform generates controversy

On 17 March the Honduran American Chamber of Commerce (AmCham) issued a statement expressing “concern” over the government's planned tax reforms which it said would increase the cost of living, reduce the country’s economic competitiveness, and discourage foreign investment.


The proposed tax changes are being met with increased concern by both the private sector and by the opposition Partido Nacional (PN). The government has said it wants to eliminate longstanding tax breaks (some which have been in place for four decades), lift banking secrecy laws, and cease the practice of writing off unpaid corporate tax debts. AmCham was highly critical of the reform, saying the text is “confusing, ambiguous, and discriminatory”. It complained that none of the taxes introduced by previous governments are reduced or eliminated, and nothing is being done to reduce the informal economy.

  • The government has defended its proposals saying the reforms are designed to end loopholes that have encouraged large scale tax avoidance and to bring in instead a “fair, progressive system”. Earlier this year President Xiomara Castro said the economy had grown by 4.1% in 2022 with inflation ending the year at 9.8%. She also stated that foreign direct investment had grown by 8.2% to reach US$758m.
  • Criticism has been expressed by a range of bodies. The association of Honduran economists (CHE) has suggested that tax breaks should be withdrawn gradually over time, perhaps over 10 years, to give companies time to adjust. The top private sector lobby Consejo Hondureño de la Empresa Privada (Cohep) says the effect of the reforms will be “devastating” describing them as “badly intentioned, damaging, and arbitrary”.  Cohep president Mateo Yibrín has been particularly outspoken, calling the reforms a “populist pantomime”.

Looking Ahead: President Castro has taken care not to align herself too closely with the fine details of the proposed changes. Getting the reform through the legislative assembly, where the government lacks an outright majority (the ruling coalition has 60 out of 128 seats) will also be a challenge. It is therefore probable that Castro will seek to negotiate with the opposition and consider making some concessions.

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