A Big Fat No from the Salvadoran Business Community

Following Secretary of State Hillary Clinton's June visit to Guatemala, some were optimistic that Central American elites were beginning to see the light (they need to pay more in taxes) with regards to strengthening state institutions in order to fight organized crime and drug trafficking. I wasn't convinced that a consensus was actually emerging and the response of the Guatemalan business community backed me up. 

In El Salvador, President Mauricio Funes and members of his administration also approached the Salvadoran business community in order to convince them of the need to pay a greater share of taxes. Their response was pretty similar to that of Guatemalan businessmen. Funes, the Secretary of Strategic Affairs, and the ministers of Justice and Security, Treasury and Defense said that they wanted to institute a tax at no more than 1.5% on individual and business assets estimated at a value of over $500,000. By doing this, they hoped to raise $380 million over the next three years. Funes argued that the government needed additional tax revenue for military aircraft and frigates to intercept drug trafficking. 

As Fernando de Dios stated in his Contrapunto article

But this proposal, like any other that has to do in this country to make the rich pay more taxes, was rejected outright by private enterprise.

The National Association of Private Enterprise (ANEP), the Salvadoran Association of Industrialists (ASI), and the Chamber of Commerce and Industry responded with a big fat "no." 

• Funes didn't come up with a comprehensive security plan. Each ministry instead asked for additional funds to focus on its piece of the puzzle. 
• Military aircraft and boats would not solve the problem of daily living  in El Salvador. 
• The government presented a solution to a fiscal problem rather than an insecurity problem.
• The government requested money to help pay for existing security policies and not funds to support new initiatives. 
• They won't support a tax increase until they have more confidence in the government's ability to carry out a successful plan.
• They won't support a tax increase until they are convinced that there is effective oversight into how the funds are spent. 

And then there's the if you make us pay more in taxes, we're not actually going to pay any more in taxes because we will pass off any and all tax increases to the Salvadoran people through higher prices and layoffs.

I can't say that I would have expected anything different from the heads of ANEP, ASI, and the Chamber of Commerce. Given their history on taxes and their relationship with the current FMLN government, no one should expect anything different no matter how much the Salvadoran people suffer as a consequence.