Monday 2 August 2021

For every ¢100 that is collected in taxes, Costa Rica spends ¢ 50 to pay public employees

Applying the same remuneration per job position would achieve savings of 300 billion colones a year, according to Pilar Garrido, Minister of Planning

Paying the bills

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QCOSTARICA – 50% of the tax revenue collected by the Ministry of Finance is used to pay the salaries of public employees, according to the Organization for Economic Cooperation and Development (OECD).

Costa Rica is the country that spends the most money in percentage terms in the OECD to pay its state apparatus. Shutterstock

Costa Rica is the country that invests the most money in percentage terms in the OECD to pay its state apparatus.

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This spending implies that Costa Rica is the country that invests the most money in percentage terms in the OECD to pay its state apparatus.

This, because in the OECD, well-known as the “Club of the Rich Countries”, the average is 25%.

The data becomes relevant at a time when the Legislative Assembly is processing a public employment reform, which promises to save the country some ¢300 billion colones a year.

However, legislators seem to forget the importance of the initiative and have already blocked the project with more than 300 motions.

The problem is that without a political agreement, it would be practically impossible for the bill to advance in Congress, which would require 38 votes to be approved in the first of two debates.

Removing the rectory of public employment from the Ministry of Planning, regulating collective agreements and setting a standard salary, are some of the issues that make legislators doubt.

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There are even legislators such as Roberto Thompson of PLN and Pedro Muñoz of PUSC, who have presented another bill, considering that the current bill cannot advance because it presents errors.

“In politics, the order of the factors does alter the product. The first thing that is needed to restructure the finances of this country is a serious law and therefore, from the opposition, we are not only criticizing a nefarious and spurious government proposal, but we also make a proposal that is serious,” Muñoz told La Republica.

Meanwhile, the Alvarado government considers the public employment plan as one of the most important structural reforms; in addition to the heart of the agreement reached Friday with the International Monetary Fund (IMF), for a loan of US$1.75 billion dollars.

Establishing the same salary for public employees with equal responsibilities would allow the State to save more than ¢300 billion colones a year on average, according to estimates made by Pilar Garrido, Minister of Planning, generated by freezing the salary bonuses and raises of officials who have a salary above the standard salary, will not be able to receive increases of any kind.

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In cases where the worker earns lower salaries, there will be the possibility of making an upward adjustment.

In effect, approving the public employment law, the long and short of it, is that public wages would be frozen until 2033, when it is expected that there will be a decline in the level of debt.

“In the project we are promoting a transitory plan that, given the public debt situation, includes the application of the fiscal rule and contemplates the savings from annuities that will no longer be paid to those who move to the global salary. This will generate savings from year one of 0.6% of GDP only in the Central Government and would reach 0.9% of GDP in year 14,” explained Garrido.

The initiative has already begun proceedings in the plenary for its vote in the first debate and is considered the “most ambitious” law regarding the reform of the State.

Big Spenders

While the average of the Organization for Economic Cooperation and Development (OECD) is 25%, Costa Rica tops the list:

  • Costa Rica 50%
  • Peru 35%
  • Brazil 33%
  • Canada 30%
  • United States 30%
  • Chile 29%
  • Australia 29%
  • Spain 27%
  • Norway 27%
  • Switzerland 25%
  • Portugal 25%
  • France 23%
  • Mexico 23%
  • Colombia 19%
  • Germany 16%

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Paying the bills
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