Monday 26 September 2022

Congress approves reduction in 2021 Marchamo

The reduction alleviates the pockets of Costa Rican households, and opens a gap of at least ¢50 billion colones in income that the Government

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24 September 2022 - At The Banks - BCCR

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QCOSTARICA – As had been expected, Congress approved on Tuesday night the bill to reduce the property tax of vehicles of the 2021 Marchamo.

By a majority vote, 43 in favor and none against, the bill was approved in first debate, after a marathon session and repeated attempts by the ruling party to prevent the advance of the initiative.

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According to the consensus, the Ministry of Finance is ordered to lower the cost of the Marchamo according to the following scale:

  • 50% of the amount of property tax for passenger, light and and heavy vehicles, vans and buses, tourism, agricultural machinery, car rental and public service vehicles with a fiscal (tax) value of up to ¢7 million colones.
  • 25% for passenger vehicles with a tax value that ranges between ¢7 million and ¢10 million.
  • 15% passenger vehicles with a tax value that ranges between ¢10 million and ¢15 million.
  • Ships, boats, and aircraft must pay 100% of the property tax.
  • In addition, motorcycles with a tax value of less than ¢1 million are exempt from payment of Value Added Tax (VAT).
  • A discount of 16.79% in the payment of the canon to the Public Transport Council (CTP) for the concessionaires or permit holders of regular public transport routes.
  • Decrease of 16.63% in payment of the canon to the CTP for the permit holders of special public transport services.
  • A 21.59% reduction in the payment of the canon to the CTP for concessionaires or permit holders of taxis and special services.
  • A 50% reduction in the payment of the canon to the Regulatory Authority of Public Services (Aresep) for all public transport operators.

Legislator Roberto Thompson, from the National Liberation Party (PLN), highlighted that the reduction in the vehicle property tax – the component with the greatest weight in the Marchamo (64%) – will benefit more than 80% of the vehicle fleet.

“It has been an important effort to bring some relief to the hundreds of companies and thousands of people affected by the crisis (…) In general terms, the agreement is satisfactory,” said Thompson.

The consensus excludes from the benefit all the hierarchies of the supreme powers, the President, vice presidents, ministers and vice ministers, deputies. magistrates of the Supreme Court of Justice and the Supreme Court of Elections.

The reduction also excludes the superintendents, hierarchs and members of boards of directors of State banks and public institutions, mayors and deputy mayors.

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The initiative also does not include new taxes to finance the lack of resources that the Ministry of Finance will cease to receive, a condition that the President Carlos Alavarado’s party, the Partido Accion Cuiadana (PAC) threatened.

Independent legislator Dragos Dolanescu – who presented the bill for the 50% reduction of the Marchamo – described the decision as historic.

“The government had to give in. They had to accept the reduction and without (new) taxes,” he declared.

The bill is expected (needs to be for the reduction to take effect on Sunday, November 1, when the Ministry of Finance begins the collection of the 2021 Marchamo) to be voted in the second debate next Thursday, and then it will go to the President’s desk for its signature and publication in the official newspaper La Gaceta by Saturday.

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The reduction, in addition to the reduction in the mandatory vehicle insurance (SOA) announced Tuesday afternoon, is expected to alleviate the pockets of Costa Rican households affected by the pandemic.

However, the plan will open a gap of at least ¢50 billion colones in income that the Government expected to cover its end-of-year expenses, such as the Aguinaldo (Christmas bonus) for public officials.

The gap is almost 0.15% of Gross Domestic Product (GDP), at a time when the 2020 budget reflects a deficit of more than 11% of GDP, a historic figure that brings the country closer to a severe economic crisis.

 

 

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