## Central American Tax Reform: Trends and Possibilities

_IMF Working Papers, December 1, 2002_

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## Bibliographic details
- Authors: Janet Gale Stotsky, Asegedech WoldeMariam
- Published: December 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451875423.001

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### Summary
- Central American tax systems are modern in their orientation, though there remains scope for beneficial reform.
- Value-added taxes are the mainstay of collections, but their performance varies.
- Income and property taxes remain relatively underused and should apply to higher income taxpayers more comprehensively.
- Tax reform needs to be mindful of global competition.
- Continuing improvement in administrative performance is also essential.

### Key Findings
- Value-added tax (VAT) is the principal revenue source across Central America, but VAT performance differs across countries.
- Income taxes (personal and corporate) and property taxes are underutilized relative to their potential revenue contribution.
- Broader and more comprehensive application of income and property taxes to higher-income taxpayers is recommended to improve equity and revenue mobilization.
- Tax policy choices should account for global competition and potential cross-border tax effects.
- Strengthening tax administration is necessary to realize revenue gains from policy reforms.

### Policy Recommendations and Considerations
- Expand the tax base for income and property taxes to ensure higher-income taxpayers are more comprehensively covered.
- Maintain and improve VAT systems, addressing country-specific performance issues to enhance revenue collection.
- Design tax reforms with sensitivity to global competition to avoid adverse impacts on investment and competitiveness.
- Invest in continuing improvements in revenue administration to raise tax capacity and enforcement effectiveness.

### Subjects and Keywords
- Subjects: Corporate income tax, Income and capital gains taxes, Income tax systems, Personal income tax, Revenue administration, Taxes, Value-added tax
- Keywords: Central America, Corporate income tax, enterprise income tax productivity, enterprise income tax tax rate, flat rate, Global, Income and capital gains taxes, Income tax systems, personal income, Personal income tax, revenue productivity, tax burden, tax rate, Tax Reform, tax revenue, taxable income, VAT revenue productivity, WP

*Source: IMF Working Papers — "Central American Tax Reform: Trends and Possibilities" by Janet Gale Stotsky and Asegedech WoldeMariam, December 1, 2002 (Working Paper No. 2002/227).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/central-american-tax-reform-trends-and-possibilities-16117_