The dialogue regarding the Tax Justice Law in Honduras has sparked a vigorous debate among private industry, trade organizations, and governmental officials. The tax reform initiative, advanced by the present administration, is viewed by industry leaders as an imminent threat to employment stability and the ongoing operation of numerous firms in the nation. The primary worry centers on the removal of tax breaks that have been crucial to the growth of industries like manufacturing, agricultural exports, tourism, and construction, which, per business executives, might lead to a series of shutdowns and substantial job losses, particularly affecting 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 Tax Justice Law provides for the elimination of tax exemption and relief regimes, affecting more than ten productive sectors, including free zones, tourism, renewable energy, and manufacturing. According to data from the business sector, more than 400,000 direct jobs and more than one million indirect jobs currently depend on these regimes, especially in the agricultural and industrial supply chains and exports. The elimination of these incentives could lead to the closure of factories, workshops, shops, and farms in both urban and rural areas, leaving thousands of Hondurans without formal employment and increasing pressure on the informal sector.
A report from the Honduran Council of Private Enterprise (Cohep) suggests that the tax reform could adversely affect industries like tourism, manufacturing, and agribusiness. For instance, within the manufacturing sector, around 40,000 positions and over $733 million in exports may be jeopardized, while in tourism, the potential impact might include the loss of numerous jobs both direct and indirect, along with a sharp drop in investment and wages. Additionally, the rise in operational expenses, particularly for micro, small, and medium-sized businesses, would make their market survival unfeasible, thereby worsening the issues of unemployment and underemployment in the nation.
Impacts on society and different initiatives from the business community
The reform’s societal consequences are anticipated to be permanent, posing the threat of rising poverty, compelled migration, and skepticism both within the country and abroad. The growth of the informal economy and the disappearance of formal employment with benefits might degrade living standards and reduce tax revenue, impacting all residents of Honduras. Entrepreneurs express worry about the chain reaction regarding social stability, cautioning that job loss might lead to deeper poverty for the nation.
In light of this situation, private enterprises have put forward options like cutting the value-added tax (VAT) from 15% to 12%. The goal is to leave more money with Honduran citizens, boost the economy, and create jobs. Furthermore, they advocate for conducting inspections and audits on tax-exempt firms that act improperly, utilizing the authority already provided by existing laws, rather than removing incentives for every sector. The corporate community emphasizes the importance of discussion and engagement with all productive parties before implementing a reform that might bring about lasting impacts on the nation’s economic and social progress.
The discussion regarding the Law on Tax Equity remains heated, with pressing appeals for Congress to critically assess the details of the legislation and steer clear of choices that may exacerbate the core issues of Honduras, including joblessness, poverty, and migration.
