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Friday, October 31 2014 @ 11:54 PM EDT

ITBMS To Rise From 5% to 7%

Money MattersInflation and a decline in purchasing power is what is expected with the new tax reforms announced by the Government, especially those that indicate an increase from 5% to 7% in the ITBMS sales tax, funds that will be allocated to pay for improvements in public safety and security and to pay for the Universal Fellowship program. "If the government increases the ITBMS from 5% to 7% the amount of money collected would increase by 40%, which means the government would collect an additional $240 million dollars per year from this tax increase alone," said economist and partner in BDO Panama, Aristides Hernandez. "This measure will have a strong impact on inflation of Panama, which in recent years has been the main socio-economic problem the country," Hernandez said. He added that this effect on inflation, coupled with the effect of the increased minimum wage could put inflation in Panama in from 4% to 5% annually. Public accountant Chen Luis Gonzalez is concerned that "a 40% increase in the ITBMS is very damaging to the broad popular sectors and lower income people living in poverty and extreme poverty, as this unfairly reduces growth in their already low purchasing power." "I propose that there should be no increase in the ITBMS and that the additional money needed by the Government for their work should be obtained through efficient and effective and efficient spending," said Chen Gonzalez. The Government notes that with the new reforms more than 49,500 small businesses will pay less income tax than they currently pay. According to Delfín Aparicio, Director of the Panamanian Microfinance Network (Redpamif) in response to Thursday's announcement, "we need to be clear about what the government will do - this is like when they talked of the minimum wage at first they said one thing and then it turned out that they did something that affected more than one sector." "This may be a palliative and next year things stay the same, however, we are not clear what is the real offer for the MYPIMES, we have not captured the essence of the Reformation, we are raising taxes with the ITBMS while on the other side they say they are going down," he said. "The experience we have had during these seven months with this government is that they say one thing and then they fix things they did not originally calculate prior to approving them, that's the problem we have with them," he said. (Source: Panama America)
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