MercoPress. South Atlantic News Agency

Political agreement in Paraguay to impose export levies on soybeans and beef

Paraguayan Finance minister Dionisio Borda determined to balance the budget

The Paraguayan government is working with Congress to agree on budget cuts and possible tax increases, (levies on beef and soybean exports) that should help balance 2011 expenditure and revenue.

The original fiscal deficit was estimated at 0.8% of GDP, while the final version approved by Congress has taken it to 2.5% of GDP (400 million US dollars) according to Finance minister Dionisio Borda.

“We are requesting the support from Congress since these are sensitive issues and we need to increase revenue”, said Minister Borda following a meeting with the leader of the Lower House Victor Bogado.

Bogado revealed that among the issues addressed was a tax on Paraguay’s main exports (beef and soybeans) since there has been “windfall earnings for farmers” so “we are planning to present a bill next March to that effect”.

“We can’t force government to spend funds it does not have, nor impede it to collect what it needs to meet the bills”, added the lawmaker, considered an implicit message that there is support in Congress for the initiative.

Another issue addressed was the introduction of an income tax system (sponsored by the World Bank), a bill that was sent back by Congress demanding a review of certain points.

“There are sensitive points which were observed in Congress that if corrected can again be assessed and analyzed to ensure it is a fair tax and not a levy on people who work”, added congress member Bogado.

According to the bill to tax Paraguayan commodity exports, grains and oilseeds would suffer a 6% levy while beef, 5%. Part of the funds would be invested in specific infrastructure projects for agriculture.

The bill has the support from Minister Borda who has repeatedly requested Congress for additional “fiscal instruments” to help finance budget expenditure increases.

Borda anticipated that the Executive branch would be trimming expenses by 3.2% and expects similar percentages from Congress and the Judiciary branch.

According to Finance Ministry documents 45% of the deficit increase was due to the creation by Congress of 5.800 new government jobs including 2.468 in the Judiciary.

Paraguay as many developing countries is benefiting from the surge in commodity prices and the economy which contracted in 2009, expanded 14% last year.