Everything indicates that during the first year of President Bernardo Arévalo’s government there is ample availability in the fiscal fund, considering that the Technical Commission on Public Finance (CTFP) proposed three tax collection scenarios: low, medium and high, which are far exceeded by the collection expectations by the Superintendence of Tax Administration (SAT).
The CTFP is the body that by law prepares the scenarios to calculate the collection, based on estimates of economic growth. It is made up of delegates from the Ministry of Finance, representatives of the Bank of Guatemala (Banguat), Superintendency of Tax Administration (SAT) and the Planning and Programming Secretariat of the Presidency (Segeplán).
Due to the change in government authorities, and the non-approval of the 2024 budget, we will work with the same amount of public spending in 2023, which was Q116,130 million. To finance it, the tax collection scenarios known to the indicated body for 2024 are the following, as stated in Minutes 01-2024, Extraordinary Work Meeting of the CTFP dated February 7:
- Low scenario: Q98 thousand 759.6 million
- Medium scenario: Q99 thousand 819 million
- High scenario: Q100 thousand 885.1 million
The differences range from Q915.1 million to Q3,40.6 million.
Regarding net income 2024, the approach is:
- Low scenario: Q94 thousand 448.4 million
- Medium scenario: Q100 thousand 507.8 million
- High scenario: Q101 thousand 573.9 million
In the minutes known to the CTFP, it indicates that the interim Mayor of Collection, Érick Echeverría, made some observations when considering the average scenario and its due implications:
- Closing estimate: Q99 thousand 819 million.
- Execution with respect to the goal: 116.4%.
- A 5% interannual variation is anticipated with respect to the 2023 collection.
- Central government tax burden: 11.8% of gross domestic product (GDP).
The document also exposed local and international risks and challenges that have to do with the estimates:
- Macroeconomic and financial stability.
- Changes in monetary policy in advanced economies.
- Geopolitical conflicts with economic and social repercussions.
- Price stability in international trade.
- Update of legislation regarding access to banking information.
- Legislative agenda that promotes greater tax incentives.
“Underrated” ranges
Érick Coyoy, analyst at the Social Studies Research Association (Asies), explained that the collection goal of Q100 billion estimated by the SAT is considered very feasible, taking into account that the growth in income compared to 2023 is only of 5%, “is well below the 8% increase in 2023.”
He recalled that so far the expectation of economic growth above 3% for this year remains, according to the most recent estimate from the World Bank (April 2024). But in addition, inflationary pressures persist due to the expansive monetary policy in the United States, which is reflected in a new increase in the international price of oil and, consequently, of fuels at the local level.
In his opinion, this will favor collection, “so unless a severe shock externally, the forecast of growth and increased collection seems totally feasible.”
Meanwhile, Abelardo Medina Bermejo, from the Central American Institute of Fiscal Studies (Icefi), explained that according to the observed values and the macroeconomic projections of the central bank, as well as the behavior of the exchange rate and foreign trade of Guatemala, the Tax collection at the end of 2024 should be around Q103,100 million.
This would represent a growth of 7.9% compared to the previous year and would exceed by about Q16,800 million what is in the tax goal negotiated by the previous Government with the SAT (Q85,765 million) and which is far from what should have been contemplated. as a commitment for the tax administrator during this year, “a practice of underestimation that has been seen in recent years,” he stated.
“Overall, it is estimated that Guatemala’s tax burden will remain around 12% of GDP, perhaps improving to 12.1%. This differential, if it is actually registered, would be the natural collection of the country, although the political discourse of the authorities intends to present many improvements in the work processes of the tax administration,” said the analyst.
“Revenue growth compared to 2023 is only 5%, which is well below the 8% increase in 2023.”
Érick Coyoy, Asíes analyst
In his opinion, although it is true that the level of collection is important, the MInfin – not the SAT – should present the level of tax non-compliance and the risk perception of evaders, “given that the Minfin is the real person responsible.” of the administration and effectiveness of taxes in the country; All of this would allow for a concrete evaluation of the performance of the collection authority and not just the achievement of the goal, which is very subject to political agreements.”
Incidence factors
The specialists were asked what could be the factors and aspects that may affect collection, about which they mentioned:
- The expectation of recovery in world trade, after the severe drop in 2023. The WTO (World Trade Organization) does not estimate such a dynamic recovery, but at least it will not continue to fall.
- In the case of Guatemala, the increase in imports, inflationary pressures, oil and fuel prices, which have increased and this favors revenue collection because demand is not reduced as much.
For Icefi, the maintenance of collection at the levels of previous years implies that, in essence, the administrative capacities of the SAT have remained relatively constant, although it has not been possible to effectively sustain the improvements in the long term. term.
It is interesting to note that the local political crisis did not cause major effects on revenue collection, despite the fact that different authors mentioned the theoretical effects of the conflict on economic activity, which were not really observed in practice.
“It seems that this year will be, like the last ones, of relative stability in terms of collection, since the tax goal is strongly underestimated and there will be no surprises in the performance of the SAT. Thus, the superintendent will meet his goal and of course, there will be an additional surplus of around Q16.8 billion that is not budgeted, which guarantees that the Government, if it does not execute, will have sufficient resources, even without the need to place bonds. In any case, no improvement is sought for the well-being of Guatemalans,” Medina Bermejo remarked.
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