The main reason for the jump in the deficit is the supreme court's ruling that the Impuesto a las Empresas Mercantiles y Agropecuarias (Iema) is unconstitutional. The suspension of this tax lops Q2.5bn off the government's tax income. The tax was introduced by congress in 1998 and has led to a steady increase in the government's tax take in subsequent years, thanks to the recovery of the industrial sector in the past five years. In its first year the Iema netted Q718m, but that figure had increased to Q2.5bn by 2003.
The influential Comité Coordinadora de Asociaciones Agrícolas, Comerciales Industriales y Financieras (Cacif), in alliance with the Asociación Gremial de Exportadores de Productores no Tradicionales (Agexpront), launched the court challenge to the tax. The business sector's lawyers argued, successfully, that the Iema contravened the government's statutory duty to promote economic policies to develop the country and to incentivise the agricultural, industrial and tourism sectors. The lawyers also argued, successfully, that the tax increased production costs and damaged the competitiveness of all these sectors. Under the constitution the government must promote business competitiveness.
Banks
The banking superintendent reckons that it will have to increase the number of financial institutions it monitors from 108 to 165 this year. This is because of new anti-money laundering legislation. Altogether, the superintendency will be responsible for what goes on at 422 branches and offices. The superintendency budget is set at Q189m for 2004 (US$23.3m). The bulk of the money comes from the central bank: it provides Q101m. The banks themselves provide Q58m. This is just 5% up on the 2003 budget. Almost 85% of the budget goes on wages and salaries. Besides combating money laundering, the superintendency is also responsible for ensuring the health of the banking system and running the country's deposit insurance scheme, the Fondo para la Protección del Ahorro.
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