Rolling back the Security Tax

Media inside and outside Honduras are reporting on actions Wednesday by the Honduran Congress removing the security tax originally promoted by former security minister Oscar Alvarez, supported by Juan Orlando Hernandez, head of Congress, and Porfirio Lobo Sosa.

This tax was what Alvarez was counting on to buy Super Tucanos and other new equipment for the military.

The English-language coverage by Reuters foregrounded complaints that the new tax was "crimping" mining. A Mexican version of Reuters' article led with the fact that the reform would cut taxes charged mining companies by more than half, from 5% to 2% taxes on raw minerals.

A 3% tax on bank withdrawals was removed entirely. Allowed to continue without alteration were a 1% tax on mobile phone companies, and a 0.5% tax on fast food companies.

The reform also introduced new taxation on credit card issuers.

In arguing against the security tax, the business community claimed that, rather than producing the projected $79 million the government originally estimated, the tax would produce more that $230 million.

In Honduran coverage, the actions taken were described as "reforms".

Included in this coverage was a proposal (defeated) to rename the act the "Law for Strengthening State Finances". This, reports said, would help address such criticisms by the business community, which Honduran media said suggested that funds raised might be used to finance political campaigns.

If the Honduran coverage is to be believed, the passage of the reforms illustrates the depth of suspicion of the honesty of politicians -- and an echo of this is seen in the Reuters coverage citing suspicion by businesses that the law would bring in more than estimated, although the international media don't report the charge that these funds could end up being used in political campaigns.

After the reforms, the head of the financial commission of Congress estimated the tax will produce more than $116 million. This seems to be an acceptable level of funding for the business community; the English-language Reuters article quoted an approving voice from COHEP, Gabino Carbajal, saying

"The current changes made to the reform now put the taxes at levels where private enterprise can survive."

It is hard to imagine that the timing of these changes is unrelated to the removal of Oscar Alvarez, the patron of the original legislation, from the Lobo Sosa cabinet. And it makes absolutely clear the power wielded by the mining sector in Honduras.