Monday 2 October 2023

Bankers Oppose Lifting of Bank Secrecy

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30 September 2023 - At The Banks - Source: BCCR

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The Costa Rican Banking Association expressed its opposition to the proposal of the Minister of Finance, Rodrigo Chaves, to lift bank secrecy as one of the measures to reduce tax evasion.

Chaves made the proposal, on Monday, February 10, before legislators, as one of the measures to reduce the fiscal deficit and thereby begin to lower public debt.

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“Banking secrecy is a very Costa Rican issue because most countries do not have it for the purposes of the Tax Administration,” Chaves said in the Legislative Assembly floor.

The minister gave the example of countries like the United States, where the tax authority, through international agreements, can even ask a country like Costa Rica for a person’s banking information and Costa Rica has to give it to them.

“However, the Government of Costa Rica does not have the authority, for tax purposes, for audit purposes, to see what is the tax liability of a company or a person with respect to the government of Costa Rica.”

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Currently, the General Directorate of Taxation (Dirección General de Tributación) may have access to information of a person with the prior authorization of a judge as established in the Code of Tax Rules and Procedures (Código de Normas y Procedimientos Tributarios).

“Financial institutions must provide the Tax Administration with information about their clients, including information on transactions, operations, and balance sheets, as well as all kinds of information on the movement of checking and savings accounts, deposits, term certificates, loan and credit accounts, trusts, individual investments, investments in joint portfolios, stock market transactions and other operations, whether active or passive, as long as the information is foreseeably relevant for tax purposes,” establishes article 106 bis of the Code.

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For this, the procedure begins with the submission of a written request to the administrative contentious court (juzgado de lo contencioso administrativo).

“The Asociación Bancaria Costarricense (ABC), for reasons of principle, has always defended the position that mediates the request of a judge to lift bank secrecy; it is important to consider that the data is extremely sensitive and for security that procedure must be maintained,” said Mario Gómez, legal advisor for the ABC.

“The ABC considers that it is not convenient to lift bank secrecy in the way in which it is being proposed, giving access to all information, without discrimination of any kind, so that they process it and draw conclusions, that is prohibited in the vast majority from developed countries and even in OECD countries (Organization for Economic Cooperation and Development),” added Gomez.

The ABC advisor added that the right to privacy is a constitutional right of Costa Ricans and is assigned to specific cases, provided there is the intervention of a judge of guarantee.

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Minister Chaves said that people don’t express concern about the public information of a house, some very valuable, some that reflect extraordinary well-being, information that is in the public property record that is open to everyone, yet object to information of how the money they have in the bank.

“Mexico, imagine a country with criminality, kidnappings, that Mexico has, that thank God, in Costa Rica we don’t have, handle these things well, all normal countries, those of the OECD, handle the systems,” said the Minister.

There is currently a bill in the Committee on Tax Matters (omisión de Asuntos Hacendarios) presented by the fraction of the Partido Acción Ciudadana  (PAC) that proposes to modify articles 106 bis and 106 ter of the Code of Tax Rules and Procedures and one of the most important changes is the elimination of the application before the court. This takes up an initiative of the Frente Amplio that was presented in the previous legislative period (2014-2018).

Currently, banking secrecy laws are in effect, which means that no one can access your account information, be it at a State or private bank, without a court order.

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