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Honduran Taxes Prey on the Least Among Us

By: Contributor - Jul 6, 2015, 10:28 am
The tax burden in Honduras surges as the government tightens regulations (<em><a href="http://lanoticia.hn/nacionales/la-dei-a-verificar-cumplimiento-de-impuestos/" target="_blank">La NoticiaHn</a></em>)
The tax burden in Honduras surges as the government tightens regulations (La Noticia)

Español Over 70 percent of the Honduran workforce operate in the informal sector, according to the World Trade Organization. As the Peruvian lawyer Enrique Ghersi explains, informality is a survival strategy among the poor, who can’t afford to comply with regulations, making this one the only reasonable alternative.

Honduran policymakers seem hellbent on forcing formalization of the workforce and enacting economic apartheid on those who resist.

The Honduran tax collection agency (DEI) has been implementing a new invoicing regime, promoted by its director Miriam Guzmán, which comes with several problems and a surge of costs for small business and the informal sector of the economy.

Currently, many supermarkets and other business offer goods purchased from informal entrepreneurs, such as small farmers, carpenters, or bakers. The new tax scheme will force companies to demand its suppliers to register and comply with the regulations, otherwise they will face a tax increase, and won’t be able to back the expenses with the corresponding invoices.

It’s unreal to think that this massive legalization will become a reality, and many businessmen have raised concerns that the result will be the increase of fiscal exploitation over the same segment of the population, rather than an expansion of the tax base.

Miriam Guzmán, Directora de la Dirección Ejecutiva de Ingresos (DEI).
The head of the Honduran tax collection agency has launched a crackdown on evaders. (La Prensa)

In a slow economy, such as the one in Honduras, it is necessary to leave the money in the citizens’ hands, so that they can invest it in their daily consumption and business ventures. Transferring it to the hands of politicians to fund corruption and populist measures to attract voters will only aggravate the country’s situation.

The problem is not the lack of government resources, but that it is spending too much to satiate its political ambitions leaving aside basic functions. With the new system, those who receive few benefits from the government will have to pay more taxes, despite not currently having access to education, healthcare, or justice.

Hondurans can’t take a breath. On the one hand, they are constant victims of assault and extortions by common criminals, and on the other, they are burdened with the state’s voracious hunger for increasing revenue.

However, evading taxes in Honduras is not only an economic survival strategy, but even a matter of physical integrity. In 2013, an investigation revealed that the DEI has been infiltrated by members of different groups in organized crime, such as gangs and the maras, who use taxpayer information to coordinate and set the so-called war tax. Do they really want us to pay more taxes under these circumstances coupled with a collapsed justice system?

Tax Aggression as Intimidation

The politicization of public institutions is a well-known phenomenon in Honduras, and the DEI is no exception. In the style of the IRS scandals, people are starting to claim the DEI is persecuting them for their opposition to tax aggression. Businessman Jimmy Dacarett filed a complaint to the National Commissioner of Human Rights (Conadeh) against DEI director, Miriam Guzmán, alleging she issued notifications to audit his company after she mentioned in a radio show that she had done so due to his political positions.

Intimidation has been signed into law: the Tax Code requires the DEI to file accusations against taxpayers, even if they rectify any mistake at their tax statements before the DEI detects them. Likewise, a Criminal Code reform penalizes with three to six years in prison for those who incite people not to pay taxes. One has to wonder whether the distribution of books by Henry David Thoreau or Lysander, who promoted fiscal resistances as a means of protesting against state actions, are reached by the measure.

Militarizing Honduras

Representante del restaurante Tonys Mar detenido por la PMOP por ser acusado del delito de defraudación fiscal (foto El Heraldo).
Military Police transfer a restaurant owner after tax allegations (El Heraldo).

When the Military Police for Public Order (PMOP) started to patrol the streets of Honduras, the government argued that its goal was to fight crime: gangs, maras, drug traffickers, and hitmen. But the militarization of a society always ends the same way, with the public more persecuted due to the a higher number of criminal offenses. After a reform in late 2013, the Military Police was granted the power to address tax fraud and smuggling.

Does the DEI need the hooded soldiers, armed with Galil ACE 21 rifles — which can shoot up to 700 bullets per minute — and protected by level 3 kevlar, in order to collect taxes from the Honduran businessmen?

The PMOP is a heavy financial burden for the taxpayer and using it to address non-violent crime is another instance of wasting valued resources which in turn persuades many Hondurans to continue evading taxes.

Translated by Adam Dubove.