Progressive Tax Reforms Approved in El Salvador

Source: CISPES

On July 31, El Salvador’s National Legislative Assembly passed a package of tax reforms aimed at shifting the fiscal burden from the nation’s poor majority to the wealthy elite and easing the country’s dependence on international loans to finance important social investment. The bill was approved despite a fierce campaign against it in the nation’s conservative media.

The measures were drafted by the current leftist Farabundo Martí National Liberation Front (FMLN) administration, and passed with the votes of legislators of the FMLN and the conservative Grand National Alliance (GANA) party. The package includes a tax on non-productive properties valued at over $350,000; a minimum 1% tax on companies’ net assets; a tax on financial transactions over $750, with exemptions for remittances sent from families living abroad, cash withdrawals, credit card payments, social security, salary or loan payments; and the elimination of the exemption of newspaper owners from income tax payment.

Salvadoran media continues to wage its crusade against the new taxes, and the right-wing Nationalist Republican Alliance (ARENA) opposition party has even threatened to file a suit against the bill’s constitutionality. Nevertheless, the FMLN administration has celebrated the package’s approval as another step towards economic justice and fiscal responsibility. “With so much need in a population as unequal as ours, taxing the sectors with the highest contribution capacity is a necessity, and that is what we have done,” said Treasury Minister Carlos Cáceres.