Honduras cuts security tax after angering businesses

Wed Sep 14, 2011 10:29pm GMT
 

TEGUCIGALPA, Sept 14 (Reuters) - The Honduran congress on Wednesday rolled back new taxes meant to boost revenue for the fight against drug traffickers and violent street gangs after business leaders complained they were crimping mining investment.

The fiscal package passed in June, and backed by President Porfirio Lobo, aimed to collect about $79 million a year for the next five years specifically to fight crime by increasing taxes on the mining, telephone and other industries.

Central America is a major transshipment point of South American cocaine smuggled north to the United States by powerful Mexican cartels. Honduras is desperate to collect more money for vehicles, communications equipment, weapons and police training to deal with the threat.

But the country's private sector said the revenues generated would far exceed that target and that the measure was discouraging business.

A tax on mining exports in the country that produces gold, silver and some base metals, was cut from an original 5 percent down to 2 percent by lawmakers who also reversed a 3 percent tax on bank withdrawals.

Lawmakers did, however, keep in place a 1 percent tax on mobile telephone companies and a 0.5 percent tax on fast-food restaurant profits.

"The current changes made to the reform now put the taxes at levels where private enterprise can survive," Gabino Carbajal a direct of the national private enterprise council, known as COHEP, told Reuters.

Mining exports Honduras $190 million last year, its fourth largest source of trade revenues.

With the original tax proposal, Honduras was responding to a call from U.S. Secretary of State Hillary Clinton during a visit to the region when she said Central American businesses and wealthy elite are not contributing enough to combat drug-related violence. [ID:nN1E75L1FW]

An army-backed crackdown in Mexico is pushing some drug operations further south into the isthmus, overwhelming the region's small governments with weak institutions.

Drug cartels and youth street gangs have made Honduras one of the most violent countries in the world not at war, with 77.5 homicides per every 100,000 people last year, a rate 15 times that of the United States. (Reporting by Gustavo Palencia; Writing by Mica Rosenberg)

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