Improving the Legal and Regulatory Framework For Leasing Businesses in Emerging Markets
The Alta Group has been active and effective in supporting leasing companies, national leasing associations, multilateral entities and governments to improve the legal and regulatory framework for leasing. Its efforts are helping expand healthy leasing industries in several countries, which in turn is increasing capital investment and economic development.
Designing Tax Incentives for Equipment Leasing in Colombia
Spurs Industry Growth of 130% in One Year
In 2003, the Colombian economy was barely recovering from negative growth experienced in 1999-2000. The government elected in 2002 was working hard to restore faith in the country and economy. However, its strategy for reducing public spending through a popular referendum had failed. The country was considering new tax reform measures designed to raise revenues in order to reduce the fiscal deficit and the load of public debt for public finances.
The Alta Group and one of its most important clients, a large leasing company, believed that tax reform provided an opportunity to propose a legal strategy for fueling domestic investment and strengthening the Colombian leasing industry. The strategy would increase government revenues by increasing the economic base that feeds taxes.
The Colombian Leasing Association (FEDELEASING) retained Alta’s services to undertake a study that compiled all economic analyses which demonstrated the link between leasing tax incentives and economic gains. The study determined that leasing tax incentives benefit countries by expanding fixed capital investment, improving economic welfare, generating jobs, enhancing productivity and driving overall economic growth.
Alta’s study was the basis for a formal lobbying effort whereby FEDELEASING convinced the Colombian government and Congress to enact leasing tax incentives. These incentives included tax deduction of lease rentals for finance leases, and bonus depreciation for the acquisition of capital goods.
The growth of the leasing industry following the tax change was outstanding. Colombia’s economic press reported that the leasing industry grew 130% between December 31, 2003 and February 29, 2004. The Colombian economy as a whole is also expanding, and its president was re-elected.
Alta succeeded in proving how beneficial equipment leasing is for the good health of national economies.
Bringing Best Practices to Central America
The International Finance Corporation (IFC), a World Bank affiliate dedicated to developing capital markets in emerging economies, retained The Alta Group in 2004-2005 to evaluate the legal and regulatory environment in Honduras and Nicaragua. IFC specifically wanted Alta to determine the best regulatory practices for strengthening the equipment leasing industries in both countries.
Alta developed a map for establishing solid leasing industries in Honduras and Nicaragua. After submitting the study, Alta led a presentation panel to discuss the report with all relevant stakeholders in Nicaragua, including government officials, legislators, bankers, attorneys, major industry associations and academia. The study has planted the seed for the drafting of a new leasing law in Nicaragua.
