Amendment of Article 22 of Decree 17-2010

This law reduces the annual tax that owners of slot machines in Honduras pay from 25,000 to 5,000 lempiras per machine. The change aims to allow more gaming businesses to pay the tax without closing, creating more jobs and generating greater total tax revenue for the State, even though the rate per machine is lower.

That by means of Decree No. 17-2010, published in the Official Gazette La Gaceta on April 23, 2010, the Law for the Strengthening of Income, Social Equity and Rationalization of Public Spending was enacted. That the aforementioned decree, in its Article 22, reforms article 34 of Legislative Decree No. 194-2002 of May 15, 2002, which contains the Law of Financial Balance and Social Protection, establishing an annual specific tax of Own Account of Twenty-Five Thousand Lempiras (L.25,000.00) that must be paid by the owner, tenant, administrator or operator in proportional monthly installments, on the possession, holding or use of each slot machine or other type of electronic machines operated by coins or mechanisms regulated by the Law of Gaming Casinos, Wagering or Gambling, by the Police and Social Coexistence Law or those authorized by the municipalities.

That the Constitution of the Republic in its Article 351 establishes that the Tax System shall be governed by the principles of legality, proportionality, generality and equity, in accordance with the economic capacity of the taxpayer.

That the Constitution of the Republic in its Article 1 guarantees its inhabitants economic and social well-being; in this sense, if the creation of taxes is done without proportionality and equity, it affects said economic well-being and investment and therefore the contributive capacity and contracting ability, having as consequences unemployment, lack of social security and education, which as constitutional guarantees the State must ensure.

That the Constitution of the Republic in its Articles 331 and 332 determine that the State recognizes, guarantees and promotes the freedoms of investment, occupation, commerce, contracting and enterprise, and in such sense the State is obliged to enact economic, fiscal and public security measures and laws to direct and stimulate investment.

That the Constitution of the Republic in its Article 64 determines: That laws and governmental and any other type of provisions shall not be applied that diminish, restrict or misrepresent constitutional rights and guarantees.

That it is an inescapable duty of the State to promote development and attraction of private investment, both national and foreign, as a mechanism to generate economic growth and sources of employment for Hondurans and being this a national priority, the Law for the Promotion and Protection of Investments was enacted for such purpose. It is noteworthy that capital investment in businesses related to the Law of Gaming Casinos, Wagering or Gambling, in most cases is of foreign or complementary order and contributes with important sources of work that the country so greatly needs.

That it is an attribution of the National Congress of the Republic, in accordance with Article 205 numeral 35 of the Constitution, to establish taxes and contributions, as well as public charges, but for such effect there must be consideration that these are proportional and equitable, allowing the investor to be able to comply with the payment thereof, without this affecting economic growth and thus the generation of new sources of employment and whose consequence generates profits as compensation for the effort that the investor has made in risking their capital.

That the tax established in Decree No. 17-2010 or which is referenced in the first Recital lacks proportionality and equity, limits the contributive capacity of the obligated party and discourages investment; given the above, it is imperative for the State to establish proportionality and equity of the tax system, in order to achieve that the investor complies with the payment of their taxes as soon as possible, thereby strengthening the economies of the country; it must be taken into consideration not to affect the profit-making purpose pursued by every investor as compensation for their investment and given all the aforementioned, it demands the reconsideration of said tax.

That Article 22 of Legislative Decree No. 17-2010 aforementioned, although the tax was discussed and approved by the legislator, without intention and spirit being oriented to collect greater income for the national treasury, with the purpose of satisfying the fulfillment of obligations and needs charged to the State, notwithstanding the difficult economic and social situation in the country, has produced effects contrary to those expected, diminishing the attendance of users to these businesses, which has led to the closure of many, leaving as a consequence unemployment and reducing the profits of their owners, which has made it impossible to pay the tax of L.25,000.00 annually per machine and has caused delays in the payment of their tax commitments with the State and the Municipalities.

That in view of the foregoing it is necessary to reform the aforementioned Decree, reducing the payment of L.25,000.00 annually per machine to L.5,000.00. It is preferable for the State to collect L.5,000.00 for 2,500 machines, than L.25,000.00 per machine for 500 machines. In this way the State receives the same amount by this means and generates more income from other taxes and does not leave so many people without employment. On the other hand, this industry generates to the State, in addition to Income Tax, Sales Volume Tax, municipal fees, Prize Taxes and taxes on machines to the Municipal Corporation of San Pedro Sula.

That it corresponds to the National Congress to create, enact, reform and interpret the laws. In accordance with Article 205 numeral 1 of the Constitution of the Republic.