The Ministry of Finance overseas all tax matters. Under current law, corporate income is subject to a 30 percent tax rate, but the current administration is studying the possibility of lowering that rate. There is no personal income tax. As an incentive to investment, the tax rate on reinvested profits is 10 percent. There is a 95 percent corporate income tax exemption for five years.
Compliance continues to be low, and charges of corruption against tax officials are endemic.
As a result, approximately 60-70 percent of tax revenue is collected by Customs on imported merchandise. In 1992 Paraguay reduced external debt with both official and commercial creditors. Full payment of arrears was accomplished without assistance from the IMF or the Paris Club by drawing down reserves. About half of the debt is to multilateral lending institutions, with the rest to Paris Club members. Paraguay continues to meet its obligations to foreign creditors in a timely fashion.