Thursday, January 16, 2014

Let them eat cake, if they pay the tax

In December the Honduran Congress passed a tax package to try to deal with the fiscal crisis the country and the government face.

It was passed by the outgoing Congress which had a majority of members from the National Party – the party that “won” the presidential election. In the incoming congress the National Party has a plurality but that is not enough to pass legislation without votes from other parties.

In a December 2013 news story, a Reuters correspondent suggested that:
 “The National Party, which holds the presidency and dominates Congress, pushed the law through before it loses control of the legislative body next month.
“The party's president-elect Juan Hernandez, who takes office on January 27, will then be able to keep a campaign promise not to raise taxes during his administration.”
I was surprised to see such a cynical (though truthful) analysis of the situation in a news source that I consider a bit conservative.

But worse is that the tax package will affect the poor and the tiny middle class more than the wealthy political and economic elites.

There will be tax increases on some items.

The most notable is that IVA, the Value-Added-Tax will go from 12 to 15%. IVA is a hidden sales tax. It is usually included in the price of items and only listed on the receipt. In the US the sales tax is not included in the listed price.

This tax is also now extended to some items that used to be on the list of items in the basic food basket, as well as other items.  The cost of electricity and fuel will also rise.

What is the reaction of people here?

I have mostly heard some indignation.

The opposition political parties will try to overthrow the tax package in the new congress.

But the Cardinal archbishop of Tegucigalpa, Cardinal Oscar Rodríguez, is quoted as saying that  “it was sadly necessary that the Honduran Parliament approve, a the request of the Government, a packet of fiscal measures to avoid that the Central American country enter into a greater economic crisis.” He added that “now what we have to do is [assure] that these are the least hard precisely for the poorest people.”

I disagree with the Cardinal, mostly because the tax package hurts the poorest.

Sure bread is not taxed – but not many of the poor eat bread. Tortillas are central to the Honduran diet.

But birthday cakes are taxed.

Sure, one might say, these cakes are a luxury.

But celebrating a birthday with a simple cake is a way the poor try to show the worth of each person. They might have saved up the money for a child’s birthday. celebration. But not it will be 15% more.

It’s just not fair.

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