Salvador war tax causes political stir. Levy threatens recent thaw in Duarte's relations with right
A period of relative harmony between the Christian Democratic government of El Salvador and its traditional enemies on the right appears to have eroded. The cause is the imposition of new taxes to help pay for the country's guerrilla war. The government imposed the taxes last month to reduce the large government deficit and to cover the costs of the seven-year civil war.
``We have made a structural change,'' says President Jos'e Napole'on Duarte. ``Now those who have more will pay more, and those who have less will pay less.''
In addition to raising income taxes for the higher income brackets, the government is levying a one-time tax on net worth.
The wealthy, conservative business sector will be hit hard by the new taxes. And businessmen are galled by what they see as ``statist'' policies of President Duarte, whom many distrust for what they say are his ``socialist'' leanings. The rightist political parties, who traditionally have defended the interests of the wealthy upper class, have attacked the new taxes strongly by:
Challenging them on constitutional grounds in the rightist-controlled Supreme Court.
Calling for ``fiscal rebellion.''
Refusing to pay the taxes.
Beginning a ``parlimentary strike'' Tuesday, allowing rightist deputies to abstain from participating in the Christian Democratic-controlled National Assembly.
Groups further to the right have made veiled calls for a military coup and Mr. Duarte's immediate resignation.
But observers dismiss the possibility of a military coup. ``There won't be a coup,'' one Western diplomat says. Most analysts say the Army realizes that it has benefited with Duarte as President, mainly because he has been able to attract substantial United States aid. This assistance has enabled the Army to grow to four times its original size. A coup against Duarte, they say, would automatically cut off US aid. The Army High Command recently stated its support for the Duarte government and said it would not participate in a coup.
Still, the Christian Democrats are concerned that the right's attacks reflect a rising tension as the right prepares for the 1988 National Assembly elections. The right's complaints come at a time when the government's popularity is already low, partly because of its unpopular economic austerity measures carried out in January 1986 to help pay for the war. The currency was devalued and prices rose sharply. The measures spurred the growth of wide labor opposition.
Although the new taxes are very different - mainly income and property taxes that will hit the wealthy more than the poor - the right has played up the similarities to last year's package of austerity measures, dubbing the new taxes the ``second package.''
Business groups have warned that the new taxes will create a disincentive for investment, leading to soaring unemployment and inflation. Sixty percent of the economically active population is under- or unemployed.
The right, which controls the two morning papers, seems to have convinced many that the second package will hurt the average person. Labor groups, even those supporting the government, have denounced the taxes.
Although the private sector wants the taxes reduced, the rightist political parties see this as an opportunity to prepare for the 1988 Assembly and 1989 presidential elections. They hope to translate discontent with Duarte into votes for their parties.
Analysts say Duarte needs the money for the war. The government hopes to raise $24 million for the war with the new taxes. Though $120 million in US military aid pays almost half the war costs, about $300 million, funds must be generated here to pay military salaries and other costs. ``The government is caught between the war and the right,'' one Christian Democrat says.
Yet, the right runs the risk of being perceived as unpatriotic in opposing a tax for a war backed by the armed forces. Refusing to pay ``war taxes'' could be seen as inconsistent with the right's position of pushing for military victory and opposing peace talks.
``If they won't send their sons to fight, at least they should pay their share of the cost,'' says a Christian Democrat, adding that the sons of the wealthy never go to fight the war their parents support.
Some analysts say the government has sought to use the taxes to force the private sector into a position antagonistic to the armed forces, once an ally. They also say the increased polarization has hurt US efforts to promote harmony between Duarte and the right. Relations between Duarte and the right had improved during the Oct. 10 earthquake when they worked together to reconstruct the capital's downtown. But, says one Western diplomat, ``There's still alot of distrust on both sides.''