Bolivia Forgives Tax Debts to Lure Informal Economy

Bolivia’s government sent a sweeping tax reform bill to Congress on Thursday that would forgive years of accumulated tax debts and create a streamlined regime to draw small businesses out of the informal economy. Economy Minister José Gabriel Espinoza announced the bill at a business congress in Cochabamba, calling it a path to formalization for thousands of suppliers and producers frozen out of the system.

The legislation, formally titled the Tax Transparency and Relief Law, centers on a new regime called SIETE — short for Integrated Special Transition System for Entrepreneurs. It replaces three separate taxes — value-added tax, corporate income tax, and the transaction tax — with a single bimonthly payment of 5% on gross revenue for businesses earning under 400,000 bolivianos (~$57,500) per year.

A clean slate for old debts

The bill’s most dramatic provision is a blanket forgiveness of tax debts — principal, interest, and fines — below 10 million bolivianos (~$1.4 million) accumulated through December 31, 2017. For debts incurred from 2018 onward, fines and interest would be eliminated and taxpayers could access payment plans of up to 24 months.

Espinoza said the amnesty targets small taxpayers whose bank accounts or assets were frozen over old obligations. The bill would also cut audit windows from eight to four years and limit the government to two years to initiate enforcement — a response to what the minister called unacceptable “tax abuses” by the state itself.

Part of a bigger overhaul

The reform fits into the broader economic reset launched by President Rodrigo Paz, Bolivia’s first conservative leader in nearly two decades, who took office in late 2025. His administration has already slashed the federal budget by 30%, reduced ministries from 17 to 14, proposed eliminating the wealth tax and the 0.3% financial transactions levy, and lifted visa requirements for investors from eight countries including the United States.

Bolivia’s economy remains under severe strain. International reserves sit at roughly $3.3 billion, of which only about $75 million is liquid. The government has secured a $3.1 billion loan from the Andean Development Corporation and is seeking up to $9 billion more. Whether a simplified tax code can bring enough of the informal economy into the light is the gamble at the heart of Paz’s agenda. This is part of The Rio Times’ daily coverage of Latin American affairs and financial news.

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