Tuesday 28 March 2023

Rodrigo Chaves had nine months to prevent Costa Rica from being included in EU Grey List

"The question is, was there a political will to do it? Can this government commit to passing a bill of this nature with only ten legislators ... when you have an initiative as important as Eurobonds for more than seven months, we had a priority," Costa Rica's Finance Minister

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28 March 2023 - At The Banks - BCCR

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QCOSTARICA – The lack of political will to promote a bill on global income in the Legislative Assembly explains why the government of Rodrigo Chaves did nothing in nine months to prevent Costa Rica from being included in the European Union’s list of tax havens.

Nogui Acosta, Minister of Finance,

Nogui Acosta, Costa Rica’s Minister of Finance, referred to this issue on Monday night, at the end of a hearing in Congress after a question from Amelia Rueda.

“The question is, was there a political will to do it? Can this government commit to passing a bill of this nature with only ten legislators? (…) On the other hand, when you have an initiative as important as Eurobonds for more than seven months, we had a priority,” said Acosta.

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Likewise, Acosta reported that he only met with former Minister of Finance, Elián Villegas, on one occasion and “he did not say anything to me,” said Acosta.

Being included in the EU’s list damages the reputation of Costa Rica, becoming a greater economic risk for foreign investments and of course subject to a more detailed scrutiny of all financial operations, are some of the consequences, after being considered a tax haven.

These consequences were confirmed by Acosta.

“The position of the international entity would be forceful; Until the extraterritorial passive income regime is amended by law, Costa Rica would remain on the list. However, the EU is clear that our country is committed to promoting the adaptations of national legislation to establish the tax on extraterritorial passive income, in line with the recommendations of the International Monetary Fund (IMF). This bill will be presented (to the legislative assembly) in March 2023,” said Acosta.

Meanwhile, the Chamber of Exporters (Cámara de Exportadores )warned of the possibility of the negative effect on the sector.

“The risk for national exports that could suffer is a drop in the face of this new international perception of the country, and we even expose ourselves to greater controls and retentions in international transactions, by banking entities,” said Siany Villalobos, president of the Chamber of Exporters.

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The absence of legislation on global income makes Costa Rica considered non-cooperative in terms of tax information.

The guidelines of the European Union establish that the passive income that a person or company generates abroad should be taxed in Costa Rica, in order to avoid “unfair competition” between the tax regimes of the countries.

In addition to the consequences already mentioned, Costa Rica could not receive cooperation from Europe, since the EU prohibits channeling money from the European Fund for Sustainable Development (FEDS) and the European Fund for Strategic Investments (FEIE).

Thus, on Tuesday, Costa Rica joined Russia, the British Virgin Islands and the Marshall Islands on the EU new list of tax havens that already included American Samoa, Anguilla, the Bahamas, Fiji, Guam, Palau, Panama,  Samoa, Trinidad and Tobago, Turks and Caicos Islands, U.S. Virgin Islands and Vanuatu.

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Politico reports that despite the four new additions, anti-poverty NGO Oxfam International remained critical.

“Regardless of today’s update, the EU’s tax havens blacklist remains a joke,” Chiara Putaturo, Oxfam EU’s tax expert, wrote in an email to Politico. “Zero and low-tax rate countries should be automatically blacklisted, and European countries should face the same level of scrutiny. Until this happens, the EU tax havens blacklist will remain a total whitewash.”


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