On August 31, 2021, the “elsalvador.com” website published about the tax revenues rising in recent months in El Salvador.
1. Tax collection
The commentator Jessica Guzmán said tax collection has already reached $ 3,680.4 million (from January to July), exceeding what is projected in the General Budget of the Nation, according to the Ministry of Finance. This is equivalent to a growth of 28.9%, i.e., $ 825.3 million more than the 2020 period.
2. Main sources of income
The main sources of income were the Value Added Tax (VAT) with $ 1,593.3 million, showing a growth of 2.5% as projected in the Budget and 38.7% compared to 2020, rising the Income Tax to $ 1,463.5 million, which is equivalent to a growth of 4% regarding the budget and 24.3% compared to 2020.
Within the amount collected in selective taxes on the consumption of alcoholic products, $ 25.9 million entered, $ 5.2 million more than in 2020, being $ 49.7 in beer tax, i.e., $ 19.2 million more than the previous year. However, this income was below the Treasury’s projection of $ 55.4 million.
3. Other tax collections
The aforementioned commentator points out that in special contributions including tourism promotion, Fovial, public transport, and public safety (paid by large taxpayers), $ 168 million are accounted for, i.e., $ 14.9 million less than in 2020.
4. Current economic situation
Tax collection has been positive, despite the economic confinement due to the pandemic by more than 700 companies and 24,000 formal jobs are still closed without recovering, according to data from the ANEP (Asociación Nacional de la Empresa Privada – National Association of Private Enterprise).
5. Reasons for the positive collection
The director of Economic Affairs of ANEP, Waldo Jiménez, points out that “the increase in the collection is also due to the greater activity of the productive sectors of the country along with the increasing of VAT taxation through consumption”, presented in the Economic Report for the first half of 2021. This is large since El Salvador is registering a significant increase in the receipt of family remittances intended almost entirely for consumption.
6. Public debt
However, despite the higher collection recorded by El Salvador, the ANEP warned that public finances remain fragile due to the high public debt that reached $ 23,256 million in June 2021, a 94% of the Gross Domestic Product (GDP).
7. Incidence of BITCOIN
In addition, the website points out that the current situation is compounded by the uncertainty generated by the adoption of Bitcoin as legal tender and is in force as of September 7. 95% of the merchants unionized in the Chamber of Commerce and Industry of El Salvador do not agree with Bitcoin use since article 7 of the regulations establishes the obligation for businesses.
There are even merchants who do not know how transactions made with Bitcoin are going to be recorded in their accounting books.
Source: ElSalvador.com 01/09/21