QCOSTARICA – Costa Rica’s high tax evasion – of up to US$3 billion a year – demonstrates that the Ministry of Finance is not capable of adequately collecting existing taxes, therefore giving tax authorities more responsibilities and a larger tax base was qualified by legislator and former presidential candidate, Eli Feinzaig, as “stupid.”
The head of the Partido Liberal Progresista (PLP) legislative faction, added that there is a risk that evasion will increase, since auditors would have to use their time and resources to pursue taxpayers outside the country, neglecting the collection of taxes at home.
Currently, the country has only two auditors and only two are dedicated to fraud issues, so there is a significant lack of resources, according to Feinzaig.
“Approving world income would be the worst stupidity that this country can do. Costa Rica does not know how to collect taxes well (…) If we continue to press for world income, what will happen is that internal collection will be affected,” Feinzaig said.
The possibility of approving a world income law was put on the table for discussion by Nogui Acosta, Minister of Finance.
The absence of legislation on this issue – according to the government – meant that Costa Rica was considered non-cooperative in terms of tax information by the European bloc since February 14.
Read more: European Union to “Grey List” Costa Rica
And it is that the guidelines of this commercial block establish that the passive income that a person or company generates abroad, should be taxed in Costa Rica, in order to avoid “unfair competition” between the tax regimes of the countries. Until the country corrects this, it will remain on the gray list of that trading bloc.
However, tax lawyers, businessmen, and some legislators believe that a world income is not necessary to remove Costa Rica from the gray list.
The fraction of the Partido Unidad Social Cristiana (PUSC) presented a proposal that will allow Costa Rica to recover its status as a cooperative nation in fiscal matters with the European Union (EU) without the need to resort to new taxes or greater charges to the Costa Rican productive sector.
The proposal implies the use of principles of good governance, such as fiscal transparency, tax equity and international standards against the erosion of the tax base and profit shifting.
“From the PUSC we are proposing to the Executive Branch this important bill to reverse this situation and counteract the effects that may be generated by the inclusion of Costa Rica on this gray list of the European Union. This proposal does not contain new taxes nor will it hit the productive sector. It is an alternative that has already been successfully implemented in other countries in terms of fiscal cooperation and transparency and that we can replicate here,” said Daniela Rojas, PUSC legislator.
On February 14, several countries were included in the gray list of non-cooperative nations in tax matters by the European Union, including Costa Rica:
- American Samoa
- British Virgin Islands
- US Virgin Islands
- Marshall Islands
- Turks and Caicos Islands
- Trinidad and Tobago