Like every early morning, Don Manolo crosses the city in silence on his motorcycle, heading toward his bakery. When he arrives and opens the metal gates protecting the display windows, he remembers that today the ISO payment is due: that tax he does not understand where it came from and that, every year, forces him to choose between gathering the money to comply with the tax authorities or repairing the back oven, which has been broken for three months.
He has three employees, an old delivery van, and many dreams still pending. He invoices with effort, sometimes gets paid late, almost never enjoys the luxury of having profits, and rarely manages to bring anything extra home for his children. But even so, he must pay a tax as if he were earning profits — as if he had money left over. The State does not ask whether he made profits: it simply demands payment. One percent of his sales or his assets — such as the broken oven or the old van — whichever is higher. That is how the ISO works.
That tax, created in 2008 as a temporary emergency fiscal measure, still remains. The Solidarity Tax (ISO) was born with the promise of being temporary, a crutch to support government finances during the global financial crisis. But sixteen years later, it has become chains: chains that suffocate the cash flow, hope, and room for maneuver of the small entrepreneur.
Some may think: “But what is one percent?” One percent that must accumulate every month throughout the year, and that falls like a stone on those who barely make profits or even lose money. Because only those who have been entrepreneurs know what that means: there are no guarantees, you work before dawn without knowing whether enough customers will come by morning to buy the bread that has already been baked, hot, crispy, and full of hope.
The ISO does not punish everyone equally. Large companies, with high profits and sophisticated tax planning, usually offset this payment without much difficulty. But for an SME, the ISO is not an advance payment: it is a sentence. It is money that comes directly out of petty cash, that must be paid even when there are no profits, that is lost even when the company is operating at a loss. More than 99% of businesses in Guatemala — around 786,000 micro, small, and medium-sized enterprises — suffer from it year after year. In many cases, they cannot even credit this payment against Income Tax, as the law theoretically allows. They pay it in cash. They advance it. They lose it. Along with it goes liquidity, the possibility of hiring, investing, and growing. These are the businesses that sustain employment, local commerce, and entrepreneurship. This is the working capital needed to replenish inventory, pay wages, maintain machinery, and survive. This is an economy of effort forced to pay as if success were guaranteed, while struggling with real risks, informality, late payments, and a market that often shows no mercy.
That is why I say: the time has come to eliminate the ISO. Not because of ideological whim, but because of justice, efficiency, and common sense. Doing so would release working capital, encourage formality, strengthen employment, and send a clear message: honest effort will not be punished by a tax system that, instead of facilitating, increasingly makes it harder to create profitable businesses in Guatemala.
Eliminating the ISO is not only fiscal relief: it is an injection of oxygen into the productive heart of the country. More than six million Guatemalans work in formal businesses that today see their liquidity restricted by this poorly designed tax. Eliminating it would mean freeing up resources to invest, hire, and innovate. It would mean reducing business delinquency, improving profitability, and multiplying opportunities for those who struggle within legality. It would also relieve thousands of exporters, farmers, and entrepreneurs who face narrow margins, global competition, and volatile prices. It could even have a moderate but real effect on the stability of basic food basket prices. Furthermore, the profitability entrepreneurs obtain on their own invested capital, known as ROE, has fallen to 17.5%, the lowest level since May 2021 and far below the 24.5% recorded in December 2022. This decline reflects a less attractive environment for investment and wealth creation. The ISO has not been a driver of development, but rather a silent obstacle. Eliminating it would send a clear signal that the State is willing to stop punishing those who produce and begin trusting those who work.
The moment could not be more appropriate. Tax revenue reached a historic figure of Q102 billion in 2024; the fiscal deficit is barely 1% of GDP; and low spending execution has left the State with enough liquidity to operate without resorting to desperate revenue-raising measures. In addition, Guatemala has begun a process of fiscal modernization: the unification of the NIT with the DPI, the mandatory use of electronic invoicing, and the progressive fight against the abusive use of “final consumer” on invoices all point toward a more efficient and fair administration. In that context, eliminating the ISO is not only viable, but also consistent with a vision of the country that bets on formality, productivity, and mutual trust between the State and the citizen.
Eliminating the ISO would cost the State around six billion quetzales per year. It is not a small amount, but neither is it an insurmountable barrier. That loss can be progressively absorbed through the natural growth of Income Tax revenues and improvements in tax efficiency. Furthermore, Guatemala currently has more than Q22.9 billion in cash availability and has just issued US$1.5 billion in Treasury bonds. At the same time, low budget execution — barely 41% halfway through the year, with only 37% execution in capital investment — leaves idle balances that could be used more intelligently and with greater solidarity. In other words: this is not a leap into the void, but a strategic decision in favor of the small entrepreneur. What is more urgent? Retaining unexecuted public resources, or freeing thousands of entrepreneurs to invest, grow, and generate employment? This is the moment. A moment to act with courage and a sense of country. Repealing the ISO is possible, viable, and ethically necessary. What is lacking is not money. It is decision.
Repealing decree 73-2008 of the ISO does not require major reforms: all it takes is a legislative initiative, political support, and the will to do what is right. Who will be the first congressman to dare to carry the flag of true solidarity, not with the State, but with the small entrepreneur who wakes up before dawn and still cannot always afford bread? Who will be the first candidate to understand that supporting entrepreneurs is planting the future? Will there be a political bloc willing to provide relief to those who risk everything, who endure without privileges or exemptions? The country needs more than fiscal reforms: it needs courage. The moment is now. History does not forget those who take the first step, nor those who hide when they are needed.
