With only weeks to go of this current administration, Finance Minister, Édgar Ayales, is recommending a move to a “Value Added Tax” (VAT) and raising the tax rate, to address the country’s financial problem.
The 44 page document entitled “Cómo lograr la consolidación fiscal?: Recommendaciones para una hoja de ruta” (How to achieve fiscal consoliation, recommendations for a road map), the Chinchilla government’s plan would heal the country’s financial situation in five years.
Proposed is a cap on the decifit (2% of production in the long term), implement a global income tax, a single wage structure for new public sector employees, evaluate and streamline tax exemptions, and increase the tax on goods and services from the current 13%% to 15%.
The Ministry of Finance document warns of the looming problem is action is not taken.
Minister Ayales explained that if the financial problem is not corrected by 2019, the public debt will exceed 58% and the government’s deficit will be around 8% of production.
For this year, the current government is forecasting a 6% deficit of production and as of January last the government debt was 34%.
Ayales said that the proposal was presented to both – the Partido Accion Cuidadana (PAC) and Partido Liberacion Naional (PLN) – political parties in the election process that could form a new government in May.
Helio Fallas, vice-presidential candidate for the PAC, told the media that he would like to study the document before offering an opinion.
“What I can say that we will study it carefully and, based on the analysis, some measures could be considered in the next government,” Helio told La Nacion.
WTH??? People are moving away from CR & MANY tourists are NOT COMING to CR – BIG TIME because of how expensive it’s gotten!!! So add MORE expense????????? How about collecting from those that already owe (that should fix the CAJA – especially isn’t it true the CAJA hasn’t even paid their OWN CAJA payments in awhile???) or taxing higher properties with a higher value (which often have bigger cars that do more wear & tear/damage to the roads).
This is a NEW plan? Doña Laura proposed the same VAT (but at a lower level) when she took office. The fact is that sales taxes and value-added taxes (even with the exemptions that are in place on certain essential items) place an unfair burden on the poor.
The answer to the budget problem is enforcement and collection of current taxes, as well as wiser spending choices – too much is lost here to corruption and buy-outs from ill-conceived contracts. If the government succeeds at collecting taxes that should be paid and still come up short, only then they should consider new taxes. As it is, the wealthy under-report income, business earnings, and the value of their assets (why this country allows people to establish the tax value of real estate is a mystery and a large opportunity for fraud) . Some of the biggest employers owe very large sums to the Caja and probably every other tax authority. They do this knowing that they will settle for a fraction of their debts if caught. This is the special brand of justice enjoyed by the rich and powerful. The unfortunate truth is that the honest Ticos and the expat community (that cannot afford to break laws for fear of deportation) are the ones who shoulder an unfair share of the tax burden here.
Perhaps this is one last desperate effort by the outgoing party in the face of promises of enforcement of existing laws and of clamping down on corruption by the apparent incoming president. Is this a last-ditch effort to protect the status quo by the PLN?