President Solis says he agrees with the need for budget cuts

(Casa Presidencial / Archive)

June 16^th, 2015 (InsideCostaRica.com) President Luis Guillermo Solis indicated his agreement with Costa Rica’s Comptroller General’s office that new taxes should go hand-in-hand with budget cuts to rein in the country’s swelling fiscal deficit.

The president, who has touted the need to increase tax revenues and crack down on tax evasion as the means necessary to tackle the deficit, said he agreed with a recent assessment by comptroller Marta Acosta that budget cuts are necessary in addition to increasing revenues, telling reporters that “spending and new revenues are part of a single goal that can not be separated” after planting a tree in the Parque Nacional in celebration of Arbor Day on Monday.

Acosta told the Legislative Assembly on June 9^th that spending cuts are urgently needed and that current efforts to cut spending have been insufficient, pointing to the fact that the government’s budget actually grew by 19% for fiscal year 2015.

Acosta said that a greater commitment from the Solis administration to rein in spending was needed.

The government’s fiscal deficit could exceed 5.7% of GDP this year.

The country’s soaring deficit has led to a string of downgrades by international credit rating firms and investment banks.

In May, the United States’ largest bank by assets, JP Morgan Chase advised its investors to reduce their holdings in Costa Rican bonds, describing the country’s current situation as a “fiscal hemorrhage.”

Ratings agency Moody’s downgraded the country’s credit rating to “junk” status in September 2014, while earlier this year Fitch downgraded the country’s outlook from “stable” to “negative.”

The Solis administration has focused on increasing tax revenues through a number of proposals to crack down on tax evasion, including a controversial bill that would permit tax authorities to seize property and bank accounts of delinquent taxpayers without a court order or judicial review.