Wednesday August 1 2:55 PM ET

Thousands March in Guatemala in Tax Hike Protests

By Tim Gaynor

GUATEMALA CITY (Reuters) - Thousands of banner-waving students, workers and business leaders marched throughout Guatemala and shut down commerce on Wednesday in nationwide protests against a tax hike.

A coalition of business and labor groups were protesting in a one-day ``national stoppage'' to oppose a two-point value added tax rise to 12 percent, which went into effect on Wednesday.

Chanting ``no to the VAT'' and swaying to a marimba band, a column of protesters stretching back over 10 city blocks marched from the capital city's National Palace to the country's constitutional court.

Guatemala's President Alfonso Portillo pushed through the reforms, which also include tougher penalties for tax evasion in a bid to raise the nation's tax revenues.

Tax revenue made up a paltry 9.4 percent of Guatemala's gross domestic product last year, the hemisphere's second-lowest tax take after poverty-stricken Haiti.

Several thousand demonstrators also marched in boisterous protests across central Quetzaltenango, Guatemala's second city in the western highlands, as local government offices shut down for the day.

``The municipality is with the people,'' town hall spokeswoman Lisbeth Hernandez told Reuters. ``The city government's buildings are all closed.''

National police spokesman Faustino Sanchez said security forces across the Central American nation ``would not permit disorder.'' Some 17,000 police remained on alert across the country, but no arrests had been reported by mid-morning.

BUSINESS ``PARALYZED'' NATIONWIDE

Protests began last Thursday when student demonstrators clashed with police outside Congress as deputies voted the tax reform package into law in a third and final reading. Five students were
injured.

Stores across the capital city's usually bustling central thoroughfares remained shut on Wednesday, many sealed with black ribbons and signs reading ``Closed for Day of National Dignity.''

Chamber of Commerce President Jorge Briz said around 90 percent of businesses across the country had also closed their shutters to protest the tax hike, together with growing concerns over corruption and violent crime.

``(The stoppage) has met with total support not just in the capital, but across the nation,'' Briz told Reuters in a telephone interview. ``The country's productive sector has been paralyzed.''

Demonstrators marching in Quetzaltenango said that they were also showing concerns over human rights in the country, which emerged from four decades of bloody civil war just five year ago.

``We are protesting three things: the human rights situation in the country, the tax rise, and the fact that we are getting little support from the international community,'' said protester Jorge Rios Mandino.

(Additional reporting by Hugh Bronstein in Quetzaltenango)

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