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Development bank urges Costa Rica to pass tax reform package

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August 12th, 2015 (ICR News) The president of the Inter-American Development Bank (IDB), Luis Alberto Moreno said that Costa Rica can not afford to delay the passage of a tax reform package unveiled by the Solis administration on Monday.

 

After a meeting Tuesday with president Luis Guillermo Solis and finance minister Helio Fallas, Moreno said that the “the time to argue whether this is the time for this reform is over,” and described the administration’s reform package as “solid.”

 

The IDB has urged the country to adopt the administration’s tax reforms in the past, including in October, when the bank chief for Central America and Mexico, Gina Montiel urged the adoption of a value-added tax (VAT), which she described as a more “efficient” means of tax collection.

 

Opposition to VAT both by opposition lawmakers as well as the commercial sector, has been significant, with the Costa Rican Chamber of Construction (CCC) warning this week that the adoption of VAT would increase the cost of housing by as much as 14 percent.

 

Costa Rican president, Luis Guillermo Solis warned late last month that the country’s economy could not survive another year without new tax revenue to tackle the government’s soaring fiscal deficit.

 

The Solis administration released some details of its plan for tax reform on Monday, encompassing six bills that would significantly increase citizens’ and residents’ tax burden.

 

In addition to the VAT, other reforms included in the plan include doubling the transfer tax on real estate from 1.5% to 3%, doubling the transfer tax on motor vehicles from 2.5% to 5%, more than doubling the income tax (for those required to pay it) from 10% to 25%, and a 15% tax on all forms of capital gains.

 

The reforms are facing strong opposition in the Legislative Assembly, with lawmakers from seven out of nine political parties opposing the reforms.

 

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  • winkdarren

    It would increase it more! The cost of materials would go up 2% (13% – 15%) then you’d be paying 15% tax on the construction (service) itself. Not to mention VAT’s tend to actually result in an increase around double the actual tax amount, due to the fact that the VAT is charged numerous times from start to finish. You should really expect the cost of building a home to go up more like 17% at a minimum to as much as 32%

  • Hardy Hansen

    I assume that it is totally unreasonable to hope that the government will try to reduce public spending by even 1 colon??? Maybe they (we) should try to make the 280 +/- government institutions that have no financial oversight be under the control of someone or something??? Tax reform this year and then what do they plan to do next year???

  • Ben

    Well i been waiting for the big banks to say the truth and we can now hear the truth. Costa Rica is very broke and there is no money. Congress is now being told you better do something or else. If you have watched what is happening in Greece and Spain thing´s in Costa Rica are going to get very bad and maybe worse than Greece. 30% of Costa Rica live on less than 2 dollars a day and with 12% unemployment and growing very fast you will soon see Soup kitchen with lines around the block just like Greece. Costa Rica is already the most expensive place to live in the America´s and now Costa Rica will be the most over taxed.
    Right now in Costa Rica there is 320.000 people that have no work and another 120.000 part workers so with all these new taxes expect people to start getting very creative to survive. When the Colon start´s to get really high against the dollar expect strikes and big problems. Now with China lowering there money Costa Rica will have to raise Intrest rates and having a credit card could get very interesting.

  • Jimmy Kirk

    With all of this talk of increasing taxes, where is the mention of cutting the excess spending that seems to be the real issue? And just what would be the long range benefit of increasing taxes, more money to the already overpaid elite? Everyday people have a budget to live on and when the spending gets out of that range, spending is cut, not borrow more. What example does the governing body set for the people to follow by saying we need more money to spend?
    Sure I would like to go on a pending spree also, but I do know that it is my responsibility to my family to pay for that urge.
    Come on President Solis show some real fortitude and say that unless excess spending is cut, there will be no more new taxes, as you promised the people. Do not let the unions run the country, they were not elected into that position, you were.

  • http://www.CostaRicaMountainHomes.com Joe Beatty

    Absurd, where it their Economic thinking? This is a death sentence if this bill is passed. Greece is in front of you and C.R. is next.

  • prdatki

    As I have said be fore, first audit all of CR Government, cut all benefits to Congress and the President, Reduce pay and cut all benefits to Gov. workers. Privatize ICE, AWA, Tax the Church, legalize Marijuana and tax it. Prisoners should work and grown cotton, and their own food. Then jail the last Two Presidents for corruption.

  • Yeims

    Ah, the old “false dilemma” fallacy, also known as black and white thinking. Examples:
    Senator Jill: “We’ll have to cut education
    funding this year.”
    Senator Bill: “Why?”
    Senator Jill: “Well, either we cut the social programs or we live with a huge deficit and we can’t live with the deficit.”

    Bill: “Jill and I both support having prayer
    in public schools.”
    Jill: “Hey, I never said that!”
    Bill: “You’re not an atheist are you Jill?”

    “Look, you are going to have to make up your mind. Either you decide that you can afford this stereo, or you decide you are going to do without music for a while.”

  • Kevin Altorfer

    Okay i can guarantee costa ricas debt to GDP is 58% much lower than greece. Greece owes 175% debt to GDP. Taxes make a nation state great with taxes you can fund education, infrastructure, public works don’t need to be privatized it won’t benefit anyone but the rich. Reform the tax system and legalize pot tax it at 25% have a progressive income tax of 10% on lower income 20% on medium income 30% on medium high income and 55% tax on all the richest costa ricans income.

  • Kevin Altorfer

    Okay i can guarantee costa ricas debt to GDP is 58% much lower than greece. Greece owes 175% debt to GDP. Taxes make a nation state great with taxes you can fund education, infrastructure, public works don’t need to be privatized it won’t benefit anyone but the rich. Reform the tax system and legalize pot tax it at 25% have a progressive income tax of 10% on lower income 20% on medium income and 55% tax on all the richest costa ricans income.

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