Monday, 26 October 2020

Hacienda Looking To Replace Sales Tax With A Value Added Tax

COSTA RICA NEWS – The government of Luis Guillermo Solís is committed to lobbying the Legislative Assembly, in December 2014, for a change in the sales tax to a Valued Added Tax (VAT).

Fernando Rodríguez, deputy minster of Finance.
Fernando Rodríguez, deputy minster of Finance.

According to deputy Minister of Finance, Fernando Rodríguez, the tax on goods “will be minimal.”

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Rodriguez said that Ministry of Finance (Ministerio de Hacienda) officials are making an assessment of the consumption pattern of people, and using information from the national census board  – the Instituto Nacional de Estadísticas y Censos (INEC) – to determine which products are consumed by the lower income class and those with higher incomes.

“Having established this (the consumption), we can determine more clearly which products will continue with exemptions,” said Rodriguez. The deputy minister said that the VAT will not apply to the “canasta basica” (basic basket).

The VAT will affect professional fees such as lawyers, accountants, notaries, engineering, architecture, medical, dentistry and veterinary, etc. that today are not taxed. The deputy minister said that discussions are ongoing to exonerate education and health services.

The application of a VAT will raise prices and raise about ¢280 billion colones in revenue for the Treasury in the first year, which is expected to reudce the fiscal deficit by an estimated one percentage point, according to Rodriguez.

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