Tuesday 2 March 2021

Marchamo is a fair tax and “it makes no sense” to reduce it, says Minister of Finance

The Marchamo is not "road tax", a tax was charged on the use of the vehicle, rather it taxes the property.

(QCOSTARICA) The Marchamo, the vehicular right to circulate, “is a fair burden and it makes no sense to reduce it in the midst of an economic crisis like the one facing the country,” assures the Minister of Finance, Elian Villegas.

The Marchamo is not “road tax”, a tax was charged on the use of the vehicle, rather it taxes the property.

Of course, he is right. What sense would it make for a government strapped for cash give up on a tax that cannot be evaded, arbitrarily set and has to be paid or you keep your vehicle parked?

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The Marchamo is nothing more than a tax on property. Between 65 and 70 percent of the annual circulation permit is just that, tax.

Responding to constituents who want a reduction in the cost of the annual circulation permit due to a decrease in traffic caused by the sanitary vehicle restriction due to the Covid-19 pandemic, legislators are proposing to reduce the tax portion of the Marchamo by up to 50 percent.

“From the point of view of the Treasury, I don’t see the sense to try to reduce the amount of this tax at a time when we require fresh fiscal resources, which do not come from debt, but precisely from the taxes that we already have. It makes no sense that we intend to decrease the tax revenue of a State that currently requires more resources.

“If we were in a different fiscal situation, with a surplus of 10% or 9% of GDP, then we could do something different, make other distributions and lower rates of Value Added Tax (VAT) or Income Tax , but that is not the fiscal situation that Costa Rica is in,” was the Minister’s response.

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The minister also explained that reducing taxes such as the Marchamo would imply a fiscally painful decision if it is taken into account that the country needs resources to finance itself for the rest of the year, given a financial deficit that could reach figures close to 10% of the GDP due to the contraction of the economy generated by the SARS-CoV-2 pandemic.

The Minister was also emphatic that it is not a “road tax”, which was repealed since 1987. That tax was charged on the use of the vehicle, not like the current one, which taxes the property.

Villegas also argues that “The vehicle property tax is a progressive tax. It is a tax paid by those who have a vehicle and those who do not have a vehicle do not pay. Also, if you have a vehicle worth ¢60 million, you pay more than someone who has a vehicle of ¢1.5 million. It is a tax proportional to its value, so, from that point of view, it is one of the taxes that should not be touched”.

 

 

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