|
CENTRAL
AMERICA |
Panama Approves Tax Bill To
Boost Revenue, Cut Deficit
By Inti Landauro, Dow Jones Newswires
PANAMA (Dow Jones) -Panamanian President
Ricardo Martinelli signed a tax bill Monday
that will boost revenue and reduce the
budget deficit into a law.
The tax law will reduce corporate tax rate
to 25% from 30% and it will also lower
personal income tax rates for the lowest
brackets. The government will offset the
loss of revenue by raising the sales tax
rate to 7% from 5%, Frank de Lima, the
country's deputy Finance Minister, said in a
recent interview.
"The idea is that those who earn more and
spend more pay more," de Lima said.
The government will also increase the list
of goods on which the sales tax will be paid
including telephone fixed lines and prepay
cellphones.
The government wanted to increase revenue
without making companies less competitive,
de Lima said.
President Martinelli, who was elected in
2009, had said during the campaign he wanted
a flat tax to be set up in the country, but
de Lima said the flat tax would have
required a bigger sales tax hike, which
wasn't politically viable.
The Panamanian government ended 2007 and
2008 with budget surpluses, but its accounts
ended 2009 with a deficit equivalent to 1%
of gross domestic product as growth slowed
down as a result of the world's financial
crisis. The country's economy expanded 2.4%
in 2009 after reporting growth rates close
to 10% in the previous two years.
De Lima said that without the new tax bill
the deficit this year would have been
equivalent to 1.9% of GDP, or about $500
million. The government will balance its
budget with bonds sold abroad and locally as
well as with loans from multilateral
lenders, de Lima said.
He said he will now revise those two numbers
and will give new guidance in the coming
days.
The finance ministry said in a statement
that the new tax bill will mean an extra tax
collection of $200 million.
Kathryn Rooney, a Miami economist with
investment bank Bulltick Capital, said
Panama's budget deficit wasn't a concern
without the tax reform and is even less of a
problem now.
She said the economy will speed up this year
with a 4% growth, which means more tax
revenue.
As a result of healthier fiscal accounts,
Rooney expects the country will be upgraded
by rating agencies before the end of the
year to investment grade.
|
|
|
|
|
|
|
|
