Friday, 30 October 2020

Costa Rica at the gates of a tax on banking transactions

In addition, three other new taxes on income and property would be part of the IMF loan deal; as a global income tax

Front Page Politics Costa Rica at the gates of a tax on banking transactions

In addition, three other new taxes on income and property would be part of the IMF loan deal; as a global income tax

(QCOSTARICA) The economic stability proposal that the Government will present to the International Monetary Fund (IMF), to obtain financing of about USs$2.25 billion dollars, contemplates the introduction of four taxes in order to increase the income of the public sector.

President of Costa Rica, Carlos Alvarado

The first of the new taxes would be a tax on banking transactions, paid on any type of money transfer.

- payin the bills -

During the first two years, the tax would be 0.3%, the equivalent of ¢3,000 colones for every million colones. During the next two years, the rate would drop to 0.2% (¢2,000 per million).

The second is a temporary increase in income tax rates for businesses and individuals, as well as for wages.

On Monday, President Carlos Alvarado announced that wages below ¢800,000 colones monthly would not be taxed.

Currently, income tax is charged on salaries over ¢840,000 monthly, in scales ranging from 10% to 25%. The higher the income, the higher the tax.

- paying the bills -

In the case of corporations, the tax on profits is up to 30%.

Third, a new property tax would be imposed in favor of the central government. Currently, there is a property tax, but in favor of the municipalities. The Executive plans to add an additional tax.

Currently, the annual municipal real estate tax is 0.25% of the property’s value. The Executive intends to add an additional 0.50% paid to the Ministerio de Hacienda (Treasury).

The fourth tax would fall on the surpluses of the large cooperatives, which today are exempt from paying taxes to the Treasury.

Since the discussion of the tax reform, in 2018, the PUSC legislator, María Inés Solís, proposed to tax large cooperatives, but the proposal did not have support in Congress.

The Economic Affairs Committee resumed the debate at the beginning of 2019, after 36 legislators from different political parties endorsed a project presented in October 2018.

- paying the bills --

The idea was to charge 10% to cooperatives who generate surpluses between ¢250 million and ¢750 million and 20% to those above the ¢750 million colones.

However, in March 2019, the idea was shelved, considered “ill-conceived” and “unconstitutional.”

The government would start negotiations with the IMF in a week or two. In the photo, the ministers of Finance, Elian Villegas (left) and Pilar Garrido (right), wtih President Carlos Alvarado (middle).

A serious error

La Republica reports that according to politicians, businessmen, and economists it consulted, the Government of Carlos Alvarado would be committing a serious error including a tax on bank transactions and the collection of world income in order to obtain the IMF loan.

Daniel Suchar, an independent economist, referring to the possible tax to bank transactions, believes there is a risk that people will prefer cash transactions, which would imply that banks would have less money to lend.

Meanwhile, a global income tax would scare away foreign investment, which is much more serious at a time when the country has unemployment above 24.4%, added María Inés Solís, legislator for the Partido Unidad Social Cristiana (PUSC).

A bureaucracy with more than 300 institutions makes the country expensive in its public services, while reducing its competitiveness, according to Enrique Egloff, President of the Chamber of Industries. La Republica

Entrepreneurs such as Enrique Egloff, President of the Chamber of Industries, considers cutting public spending through the elimination of positions, closure, merger, and sale of state assets – beyond Bicsa and Fanal – would help the State to eliminate the duplication that today generates little effectiveness and high costs.

Today, Thursday, September 17, the final proposal is expected to be announced.

 

Ricohttp://www.theqmedia.com
"Rico" is the crazy mind behind the Q media websites, a series of online magazines where everything is Q! In these times of new normal, stay at home. Stay safe. Stay healthy.

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