Thursday, 29 October 2020

[OP-ED] How to Drive Away Business Without Really Trying

Photo for illustrative purposes, from http://geoporter.net/blog/
Photo for illustrative purposes, from Geoporter.net

QCOSTARICA – When the government officials, all economists and institutional directors say that Costa Rica is expensive; it is! After all, they are the major contributors to costs.

Business, each and every chamber has complained out-loud, that we are chasing away investors, losing economic ground to neighboring countries and admitting that it is, in many cases, less expensive to live, vacation and operate a company in the United States and some countries in Europe rather than here in Paradise.

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Of course there are exceptions.

However, since the start of 2015 we have seen, each week, the loss of jobs and that established enterprise is relocating to other Central American countries, to Asia and even to the U.S.

Why?

Because the costs of doing business are significantly cheaper, far less complicated and the quest of collecting government taxes not so severe.

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This government administration in Costa Rica has a chronic case of “taxphobia”. It sees cheats behind every tree and has devised ways to make life miserable for the honest.

The newest scheme is to collect, a yet to be determined percentage, on taxes in advance of the due dates. In other words, the government assumes that all companies will owe taxes so let’s collect some of that money up front before that debt is created.

Sincerely, this is the first time I have ever heard of a nation demanding money in advance of a debt. And, with the hyper costs of doing business, who says that business will turn a profit? Many, but many do not.

The other scheme is to collect from 1.78% to 2% on each and every credit/debit card transaction and put those funds into the government coffer. If in the end the enterprise or service does not owe taxes, the money will be refunded. (Sure it will!) Does this 2% include paying monthly bills by computer? The answer is, “We’re not that advanced as yet.”

How about ATM/ATH transactions? “Now that can be done.”

So let me understand this. Hypothetically, if I bring foreign investment funds from the U.S. into Costa Rica using an ATM machine from BAC San Jose, I can be dinged 2% in taxes and another 2.5% in bank fees? Many small businesses and real estate owners do import funds to pay mortgages, levies, taxes and permits so it is not so far fetched as one might expect.

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And finally, since the country is truly run by Sala IV (Constitutional Court), ARESEP (government price fixing agency) and the Contraloria (Comptroller’s Office) and not buy elected officials, we have a spiraling cost of living, paying a corporate tax in 2015 that has been declared “unconstitutional” by Sala IV to be implemented in 2016 but one still must pay the 2015 taxes which are illegal according to the Court. And, next month both gasoline and electricity will go up in price despite the nose dive of oil.

Why? Taxes which account for 47% of each liter of gasoline and we sure would not want those to be diminished with less expensive fuel, would we?

In fact, our elected officials who admittedly have not read the agreement in total just approved another loan in the amount of US$395 million dollars at 8% from China to build out the infamous Route 32 to Limon.

Again, what will be our taxes to pay back that loan and are there any plans or blueprints in place to assure us this is the right type of construction? This is especially important since 100% of the labor and materials will come from China and not Costa Rica.

A classic example of robbing Peter to pay Paul; the loan goes from this pocket to the other pocket and Costa Ricans will pay the tab to the 1st pocket.

I agree that taxes need to be paid, but in return I also agree that those of us who still call Costa Rica “home” must get something back in return.

That simply is not happening.

And Mr. Tax Collector has gone out his way to make it impossible to justify major or minor investments into this country, or even retaining long time companies such as Jack’s and the former Atlas Group who, besides Intel, have moved on to more competitive pastures.

Stores are semi-empty and unemployment is well over 10%, underemployment has reached 20% as has poverty. There are no jobs and subsequently no sales because the cost of living is so expensive and in large part we can thank “taxphobia”.

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Juan Sebastian Campos
An expat from the U.S., educator and writer in English and Spanish since 1978 with a doctorate in business administrations (DBA) from the United States and Germany. A feature writer for ABC News, Copley Press and the Tribune Group with emphasis on Central America.

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