COSTA RICA BUSINESS NEWS —  Costa Rica’s business sectors are pointing out the negative effects of the planned 15% increase in Value Added Tax (VAT), and are insisting on the need to resolve the fiscal problem by cutting public spending.

fwk-rittenmacro-fig06_007According to representatives of the productive sector, an increase in VAT will have a negative effect on the economy. For the food industry, the 15% rise could result in the closure of production plants and an increase in informality among businesses.

José Manuel Hernando, president of the Costa Rican Chamber of the Food Industry, told that “… a review is needed of expenses as a first step before considering whether an increase in the fee is needed. This is not about protesting for protesting’s sake. They must pass reforms that solve the structural problems on the expenditure side, where the main cause of budget shortages are to be found.”

Meanwhile, Pablo Abarca, president of the Camara Nacional de Turismo (Canatur) – National Chamber of Tourism, said that “… The industry has contracts that are at least two years long, therefore the idea is to impact tourism entrepreneurs less and allow us to have a greater margin for negotiating with suppliers. If they make this increase they put us in a difficult situation and and we do not understand it because with with the tax base they have they already have the solution.”