Economic austerity measures hit Hondurans

As Hondurans enjoy Holy Week, the urgency of the economic situation of the country continues to make news.

An article in El Heraldo March 31 turns to the ambassadors for Spain and France for commentary on the recently approved package of emergency economic measures, called the paquetazo by the Honduran press. It is widely rumored in Honduras that Porfirio Lobo Sosa's government proposed this unpopular set of measures primarily to meet demands of international financial institutions.

But the ambassadors assert that this is not the case. Laurent Dominati, Ambassador for France, is quoted as explaining that if the taxes of European nations are to come as aid to Honduras, it is only "logical" that Hondurans pay their share of taxes to support their own government. Yet he was firm that this was a decision of the Honduran government, not a demand of the international community:

"Honduras is the country that has received more money per capita from the international community; as the situation is very difficult we are going to continue, whether there are measures taken or not, I believe that the efforts are good, you have to pay taxes, you have to take measures, the government is very conscious of that, but it is not a request of the international community."

The group of fiscal measures spoken of approvingly by these two ambassadors, designed by the Lobo Sosa government and approved by the Honduras congress, is projected to produce 7600 million lempiras for the Honduran government. Debated over a "marathon" four-day legislative session, the paquetazo (formally called the Law for Strengthening Income, Social Equity, and Rationalization of Public Expenses) as summarized includes a variety of new or increased taxes: a 10% tax on dividends, a tax on rental of luxury vehicles, a 15% tax on telecommunications, a 12% tax on monthly electricity consumption over 500 kilowatt hours, a 20% tax on vehicles, fees of 10,000 to 50,000 lempiras on slot machines, an "ecotax" of 5,000 lempiras on imported used vehicles, a 300 lempira tax per 1000 on cigarettes, annual indexing of cigarette and liquor taxes, a 200 lempira tax stamp required on most government paperwork, a tax of US $.03 for long distance calls, and more.

Other changes intended to reform the culture of taxation were included: A tax amnesty to encourage voluntary payment of back taxes; Duty-free shops newly restricted to airports and sea ports; Official passport holders no longer exempt from paying departure taxes at airports, and officials of the BCIE restricted in what they can bring into Honduras duty-free. Car importation comes in for extensive attention. Rental car companies will only be allowed to import up to 10 vehicles a year duty-free, with a maximum value of $15,000 US. Religious institutions will be able to import tax-free vehicles for use for up to five years, after which they will need to pay the import tax or sell them and replace them. Most government agencies are prohibited from buying new vehicles as long as the declaration of economic emergency continues.

Overall, the new measures amount to taxation of consumption in general and luxuries in particular, and an attempt to conquer the everyday practices through which Honduran merchants and consumers have routinely evaded tax collection. The stakes are high domestically and internationally for the Lobo Sosa government.