Tuesday 28 June 2022

Tax Plan (Plan Fiscal) Would Prohibit Buying Drugs With Cash

If the proposed tax reform is approved as it is written, it would be illegal to buy an aspirin, for example, with cash. The law requires consumers to pay for medicines only with a credit or debit card.

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28 June 2022 - At The Banks - BCCR

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If the government’s tax reform (plan fiscal) proposal becomes a reality and comes into force, 1.2 million people in the country would not be able to buy even an aspirin at their local pharmacy.

If the proposed tax plan is approved as it is written, consumers would be able to use cash to buy even an aspirin, for example.

The current text of the initiative, and on which there is an agreement of the majority of legislators to keep it that way, establishes that consumers can only purchase drugs using plastic – a credit or debit card, thus establishing a prohibition in the use of cash.

This automatically leaves out a large sector of the population who do not have a bank account, in turn, access to plastic, according to the latest World Bank Global Index report.

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The study (with 2017 figures) details that the percentage of the population with a bank account in Costa Rica is 68%, the only sector that would be able to buy their drugs at the pharmacy.

Included in the proposals is the mandate to 100% of ‘bankarization’ of the country. However, the premise of the government and legislators is to apply the change and force the consumer to migrate.

According to the Estado de la Nación (State of the Nation), 69% of the payments made in the country at a general level are with cash and only 15% with plastic.

But, it is legal? The eventual application of this measure has already begun to unleash controversy surrounding its legality.

The starting point is the Ley Orgánica del Banco Central (Law of the Central Bank), which establishes notes and coins as a universal and legal means of payment in the country.

Erick Ulate, lawyer and president of Consumidores de Costa Rica (Consumers of Costa Rica) affirms that articles 43 and 46 of the Central Bank law makes it illegal any attempt to limit the use of cash in the country. Additionally, doing so in the case of health services would violate the Constitution.

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“At the moment that (aw) comes into force, at 7:30 in the morning of the next day I am in the Constitutional Court presenting an action… It is illegal to limit the use of cash in the country… It (cash) is the means of payment accepted in the country, so any way to limit its use is not only illegal but also removes more than 30% of the population over 15 years of age that does not use banks,” Ulate said.

The pharmaceutical sector also opposes the measure. The president of the College of Pharmacists (Colegio de Farmacéuticos), José Alberto Gatgens said that in addition to the limitation to a sector of the population, the use of a plastic implies an additional cost for the retailer pharmacy, since the card issuer charges a commission, typically between 5% and 7% to retailers.

“That many people do not have access to a plastic is an important point and they could not be forced to obtain one to buy a drug,” he said.

The intention behind the proposed law is to establish a mechanism that allows traceability in a market that for several years is under scrutiny in the face of complaints of high prices and market concentration.

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For the Ministry of Finance (Ministerio de Hacienda) this is important as it will allow, through the sales tax, to actually know how much product is sold and at what prices.

At present, traceability is broken when payment is in cash. Hacienda argues the cashless purchases also reduces tax evasion, such as the common practice of giving the consumer a discount if paying in cash.

 

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