On average, companies in the Central American region pay 45.8 percent of their profits in taxes, while companies in Organization for Economic Cooperation and Development (OECD) countries on average pay 41 percent.

A study on the evolution of the fiscal situation in Central America by the Federation of Central American Chambers of Commerce (FECAMCO, in Spanish) revealed the fact that in Costa Rica, businesses must fork over a whopping 58.3 percent of their profits to the government.

FECAMCO prepared the study to show an important aspect of the fiscal reality in Central America. The federation hopes to use the information to raise awareness among the region’s governments on how to put tax revenue to work in an efficient and pragmatic manner so they can achieve and maintain fiscal sustainability and solvency.

 

Following is the tax burden on companies (% of profits) in six Central America nations, from lowest to highest:
Guatemala – 35.2 percent
Panama – 37.2 percent
El Salvador – 38.8 percent
Honduras – 44.4 percent
Costa Rica – 58.3 percent
Nicaragua – 60.8 percent

The federation also noted that the region’s tax systems are less taxpayer friendly than in developed countries with more payments, and lengthy hours required to comply with tax obligations. The exception on this was Costa Rica, which has worked to streamline their tax filing procedures.

In Central America, business make an average of 34 payments per year, while in OECD countries, an average of 10 payments are made.

It takes an average of 250 hours a year to fill out paperwork and meet tax obligations in Central America, while in the OECD countries this take and average of 160 hours.

OECD is a unique forum where the governments of 34 democracies with market economies work with each other and with more than 70 non-member economies to promote economic growth, prosperity, and sustainable development. Costa Rica is a non-member, and in the process of applying for membership.