Mesa's tax woes
bolivia | by Miguel Centellas | 08 Mar, 2004 at 01:00 PM | comments (0) | trackback (0)

President Mesa's tax proposals are under fire in Bolivia's parliament. MAS & NFR now oppose the proposal to impose taxes on Bolivians w/ more than $50,000.

Evo Morales (MAS) insists that the crushing fiscal deficit should be closed w/ higher taxes on oil & gas transnationals. A good idea in theory, but tricky in practice — the oil & gas sector took a pounding in October & most investors remain uncertain of staying w/ Bolivia.

Meanwhile, Manfred Reyes Villa (NFR) claims the proposed taxes on the rich & foreign transnationals don't go far enough — deeper "structural" changes are needed. There's especially opposition to the bank transaction tax — which would charge a 0.3% surcharge on every bank transaction (many fear a bank run before the tax goes into effect, which is already materializing).

The COB joined the MAS-NFR block in opposing Mesa's tax proposals. More & more it looks like MAS is swinging back to an opposition party. NFR's inconstancy is, of course, legendary.

Mesa's also under pressure from the cruceño business sector, which has vowed to not pay new taxes. Ironically, the Santa Cruz business sector (especially agribusiness) has most benefitted from government subsidies, bailouts, and loan moratoriums — 63.62% of all government assistance (see graphic). It also has the country's highest rates of tax evasion.

Meanwhile, there's a developing "brain drain" in the government bureaucracy after Mesa lowered salaries by presidential decree. Several high-level bureaucrats (including Mesa-appointed vice-ministers) are allegedly preparing their resignations. Many already have.

All the bad news comes two days after Mesa celebrated the 19th anniversary of El Alto, in which he re-affirmed his promises to the city responsible for toppling Goni in October. In anticipation of his lack of political support in parliament & the business sector, Mesa's speech in El Alto swung back towards populism.

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