COSTA RICA NEWS – Brace yourself for another round of gasoline prices. This time, however, coming from the Ministerio de Hacienda (Ministry of Finance), due to an increase in the fuel tax.
The tax hike will mean an increase of ¢5 colones for super and regular ¢3 for diesel in the price at the pumps. Once (not if) the price hike is effect, a litre of super gasoline will jump from the current ¢816 to ¢821, super from ¢788 to ¢793 and diesel from ¢676 to ¢679.
The Ministerio de Hacienda said the tax increase is according to the consumer price index, calculated by the Instituto Nacional de Estadística y Censos – national statistics and census institute.
Unlike gasoline price hikes by the state refinery which required regulatory approval, this increase is by government decree, requiring only the signatures of President Luis Guillermo Solis and the Finance Minister, Helio Fallas, and then publication in the official government newsletter, La Gaceta.
The increase is expected to take effect in the first week in August.
In a press release yesterday (July 22) the government said it has little leeway to achieved a reduction in fuel prices, the highest in Central America.
The government says that one of the reasons is that it does produce oil and final price at the pump is dictated by the international price of crude oil, which accounts for 60% of the cost of a litre of fuel in Costa Rica.
In addition, if the government were to eliminate the “impuesto único” (fuel tax) it would leave a fiscal gap of ¢400 billion colones a year, equivalent to 2% of the Gross Domestic Product (GDP).
Economists in Costa Rica calculate that the average family uses up 6% of their family budget on the purchase of fuel, higher than that spent on education (5%).
A better source of tax revenues is desperately needed. Sales tax and tax on gasoline disproportionately affect the lower and middle classes. Raise the income tax rated on the wealthy and the tax on property. Property tax rates are very low here; and the system uses property valuations provided by owners, an invitation to commit tax fraud. At the very least, the government should employ tax assessors to determine property taxes. My guess is that, in doing so, property valuations would more than double (especially on high-end homes), and taxes would increase accordingly. This country has catered to the privileged for far too long, and it has bankrupt the national economy.