Taxation in Paraguay

Paraguay’s tax system is insufficient to provide the resource base to eradicate poverty in the country, and has done little or nothing to achieve a more equal distribution of income and wealth.

Two major reforms over the last decade have done little to alleviate the fiscal injustice that is generated partly by the low tax reciprocity of the soy agribusiness – Paraguay’s main export crop. Meanwhile, programs and projects to support small-scale farming receive a level of public financing accounting for just 5 per cent of public expenditure.

Paraguay has one of the highest levels of unequal land ownership in the world, labor informality is at very high levels and poor environmental regulation of soy producers threatens the livelihoods and ecosystems of those small-scale producers who try to make a living in rural areas, to grow enough food for their families and, where possible, for the wider Paraguayan population.

There are serious loopholes in Paraguay’s tax system that must be addressed in order to deliver a fairer, progressive taxation system that will allow the country to meet its social objectives.

Recommendations

A wide-ranging debate about taxation in Paraguay is needed, to give rise to a real agenda for change that would identify opportunities for a significant improvement in the taxation system to help the development of small-scale farming and to fight poverty. This report aims to contribute to a constructive, thorough debate to encourage greater fiscal justice in Paraguay.