Poverty in Guatemala - Essay Example

In 2012, only eleven point percent of the taxes reached the Central Bank. Of the 215 countries ranked in the CIA World Fact Book, the collected GDO is at position two hundred and four. However, the problem does not have any relations with too low value-added tax or income, but the inefficiency from government authorities and corrupt public servants. Now that majority of the population surive in informal economy makes it easy for the tax collector to hide behind little collection. The informal sector means that a bigger proportion of the population does not have formal businesses and formal jobs therefore; they do not operate with registered licences.

Based on this, the tax authorities cannot levy taxes on them. Registered businesses also have the tendency of evading tax adding to the complication. Comparatively, Honduras, an immediate neighbour to Guatemala spends 15.8% of the GDP after collection, Kenya; a country in Africa collects and spends 18.4 % of its GDP, and Germany, an economic powerhouse spends 40.6% of the GDP (Zakaria 36). In other case studies, Mexico spends 29.7%, South Africa 26. 8%, Costa Rica 21%, and Canada 32.3% of its GDP.

Data collected from economic sources shows a hitherto correlation (positive) between the proportion of GDP channelled through government spending and the standards of living of a country. Good public services and infrastructure explain factors behind established business activity. Senior economists from the World Bank hold that the economy of Guatemala continues to with typical support from private consumption. However, they also hold that the rate of investment is on a steady decline with little progress in the rate of productivity.

Normally, lack of or minimal productivity affects the incomes for workers negatively. The growth rate of the country’s GDP is less impressive taking into account demographic trends of the country. While the population continues to grow at an average of 1.9%, the