HONDURAS MAKES CARLOS SLIM PAY ITS TAX

The multinational companies in Latin America demand security, efficient services, infrastructure and good educational standards, but they are not very willing to contribute themselves by paying their fair share of tax. Honduras is a case in point, and is one of the most unequal countries on the continent.

The government, led by the conservative Juan Orlando Hernández, has made the telephone company Claro, a subsidiary of the Mexican multinational América Móvil (AM) – owned by the magnate Carlos Slim – pay tax arrears of at least US$ 2.5 million.

The government went through the multinational’s accounts with a fine tooth comb and reached the conclusion last December that the corporation, which has a presence in the United States, 17 Latin American countries and Austria, would have to pay the tax owed by 31 June 2015.

“There are double standards, because the big corporations pay little into the public coffers. Tax evasion has been reduced by this government’s latest measures. This is reflected in exonerations, free trade zones and maquilas (Ed: factories that produce textiles and export goods with tax privileges) and transfer costs” Raf Flores, sub-coordinator for the Social Forum for Honduras Foreign Debt and Development (FOSDEH), explained to Equal Times.

Honduras has a tax burden of about 16%, which is below average for Latin America, according to 2013 data from the Economic Commission for Latin America (ECLAC). Although Income Tax is up to 25%, tax exemptions, the equivalent of 5% of GDP, and tax evasion are undermining the system.
The companies present themselves as big donors to the construction and maintenance of schools, providing grants and other benefits. These give them the right to tax credits which reduce the amount of tax they have to pay.

The corporations also manipulate export or import – transfer – prices to reduce the amounts they declare for tax.

“Holding companies transfer activities to their subsidiaries to raise costs, hence the profits are low and they pay less tax, or they openly report losses” says Flores.

In August a new Transfer Prices Law came into force in Honduras whereby multinationals, who usually transfer their profits to tax havens, have to disclose this information.

Claro has a 31% market share, and is in competition with Tigo, owned by the Spanish multinational Telefónica and with the Honduran state-owned Hondureña de Telecomunicaciones (Hondutel).

Latin America fights back against tax fraud

The same happened to Carlos Slim in Ecuador, where the government of Rafael Correa made it pay US$ 123 million in June 2014 for unpaid taxes since 2006.

In August 2014 the Ecuador Tax Department sent a group of officials to advise the Honduran government on how to assess tax evasion by corporations and demand payment.

The telephone and pharmaceutical industries are the biggest tax debtors, which is why the Honduran government is focusing on collecting their unpaid taxes.

The Honduras Large Tax Payers Department of the Executive Directorate for Revenue (Administración de Grandes Contribuyentes de la Dirección Ejecutiva de Ingresos – DEI) has 39 potential tax payers on its books, and the one that pays the most pays barely 4%. The department has a list of 21 debtors, who owe nearly US$ 6 million.

The DEI has now created an International Tax and Transfer Price Unit to combat tax evasion.

Honduras loses over US$ 400 million in tax evasion and fraud, according to the Executive Directorate for Revenue (Dirección Ejecutiva de Ingresos). The foreign debt of Honduras, a country of only 8 million inhabitants, is over US$ 8,000 million. Six out ten Hondurans live in poverty. With government funds eaten away by tax crime, the country is not able to combat inequality or undertake social investment.
The 2014 World Ultra Wealth Report, compiled by the Singaporean consultancy Wealth X and the Swiss bank UBS, show that Honduras has 225 magnates – 10 more than in 2013 – with a combined fortune of US$ 30,000 million.

In December 2014 the Mexican edition of Forbes identified three Hondurans among the 12 millionaires in Central America.

“Tax evasion has not been reduced or calculated. There is a lot that can be done. There have to be more controls. It is suspected that the multinationals’ money ends up in Panama”, the multinationals’ favourite tax haven, says Flores.

The biggest tax pay in Mexico is Grupo México, the largest Aztec mining company, followed by the Slim conglomerate, made up of telephone and construction companies and retail chains.

But none of them pay more than 10% of their earnings in tax, according to data from the country’s tax authority, the Servicio de Administración Tributaria (SAT).

It remains to be seen whether the Honduran government will persist in prosecuting the big tax evaders and whether other Latin American nations will follow suit.