QCOSTARICA – The union of builders has warned that the proposed sales and income tax increases will make costs of services and supplies more expensive, raising the cost of building a home by 12%.
From a statement issued by the Costa Rican Chamber of Construction (CCC):
Families that want to build a house will have to pay about 12% more for it, with the proposed changes.
The Costa Rican Chamber of Construction (CCC) expresses its concern at the projects presented by the Ministry of Finance to the Legislative Assembly on the Law of Value Added Tax and Income Tax, believing that it will seriously affect the construction sector, which will go from paying 13% to 15% sales tax on materials, and for construction services that are currently exempt they would pay 15%. Additionally, there would be an increase on the tax on the transfer of property to 3%, making it twice the amount charged today.
The president of the CCC, Ing. Guillermo Carazo explained that “these projects generate a negative impact for Costa Rican families. For example, a family that wants to build a house will have to pay about 12% more for it, with the proposed changes. That is to say, if you build your house today it will cost 20 million colones, once the tax is fully implemented you will pay 2,400 additional colones “.
Source: Centralamericandata.com
The nations of the world have never been in this much debt before, and it gets worse with each passing day.
OUT of Bloombergs : According to a new report from the Jubilee Debt Campaign, there are currently 24 countries in the world that are facing a full-blown debt crisis…And Costa Rica just wants to raise taxes and not the over paid salaries and pensions and corruption. They will not fire the dead wood in the government and the dept heads that steal and don’t do a dame thing…. Down Down with Greece is where C.R. is headed.
■ Armenia
■ Belize
■ Costa Rica
■ Croatia
■ Cyprus
■ Dominican Republic
■ El Salvador
■ The Gambia
■ Greece
■ Grenada
■ Ireland
■ Jamaica
■ Lebanon
■ Macedonia
■ Marshall Islands
■ Montenegro
■ Portuga
I tried to work out these numbers myself and didn’t have much luck.
Fishy is that they are based on a house that costs the buyer around $38,000, when I don’t see much new construction of housing this affordable. Why did the industry choose housing this cheap to use for its estimates? I have to guess that it did so in order to be able to inflate the predicted tax by imagining that a low-priced house will have the same costs for engineers and architects (to be taxed) as a higher-priced house.
Fishier are the numbers themselves. The additional forecasted tax is a bit over $4500. Of this almost $800 can be attributed to the increased transfer tax while $700 to the 2% higher VAT than sales tax, at least assuming a VAT is paid on everything (which it is not). Remaining unexplained is over $2500 in additional forecasted taxes. The only source of these additional taxes would seem to be the taxes on professional services, which are currently not taxed at all. But this means that the construction industry is assuming that there are about $17,000 worth of currently untaxed professional services involved in building a house the builders are willing to sell for $38,000. Since we have to assume that the builders intend to make a profit, it follows that we are asked to believe that half the cost of home construction is attributable to professional services, while only half the cost is in materials, labor, permits, etc.
I’m not sure that construction costs really include this much for professional services, and for some professionals like plumbers and electricians, there’s an easy way around the tax: Instead of subcontracting them, hire them as employees.
Mind, I’d love it if these folks would build $38,000 houses, and would favor giving them a tax break if they did, but it looks to me like the tax forecast presented includes some pretty fuzzy math.