Thursday 16 September 2021

Taxation Aims To Seize Property And Bank Accounts Without a Warrant

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 One of the points challenged by Congress Technical Services, the draft Government against tax fraud, is that direct taxation would have a free hand to enter any business or institution without a court order (illustrative photo). | ALBERT MARIN / FILE

One of the points challenged by Legislative Technical Services Department report on the government’s draft bill against tax evasion, is the power to have a free hand to enter any business or institution without a court order. Photo for illustrative purposes.

(QCOSTARICA) In an effort to reduce the estimated ¢58 billion colones in tax evasion, the government wants to empower the Directorate of Taxation (Dirección de Tributación Directa) to seize property and bank accounts of taxpayers, without and order from a judge.

That’s one of the excesses that the Technical Services Department of the Legislative Assembly (Departamento de Servicios Técnicos de la Asamblea Legislativa) found in the draft bill,  the first legal reform initiated by the administration of Luis Guillermo Solis to fight tax evasion and the fiscal deficit.

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The report, completed this week, says it could affect property rights and the privacy of individuals by Taxation officials, who without a warrant can take possession of any money in bank accounts, including salaries and pensions, seize assets and enter business premises.

The report warns that the action of “administratively seize assets” may be considered unconstitutional, violating Article 45 of the Constitution (which states that property in inviolable) and the principle of separation of powers.

“We reiterate that it is the judiciary whose responsibility is to hear civil, criminal, commercial, labour and contentious-administrative cases,” says the report.

“The government would be judge and jury … we will not allow this bill to be approved as it is. It would give Taxation the weapons to be owners of the country,” said Rosibel Ramos, chairman of the Legislative Committee on Financial Affairs (Comisión legislativa de Asuntos Hacendarios).

The PUSC legislator added that seizures and embargos are the prerogative of the courts.

Deputy Minister of Revenue (Viceministro de Ingresos), Fernando Rodriguez, argues that the reform is not an “invention” of the Ministry of Finance (Ministerio de Hacienda), rather based on studies of other countries, especially one prepared by the Inter-American Development Bank (IDB).

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He added that the intention is to give Taxation the tools to collect from evaders.

“When it comes to recovery sometimes the judicial process is so slow that when we get there, the business or the company no longer exists, the business was sold to another company, there is no one to whom to charge, existing property or accounts to be seized, and that obviously leads us to lose money for the Treasury,” said Rodriguez.

The Ministry of Finance estimates that, with the approval of this bill, tax revenues could increase by ¢100 billion colones annually, representing 0.3% of the Gross Domestic Product (GDP).

Other Excesses
The Technical Services report also questions the plan for Finance to notify debtors through emails that it would define and possibly could never reach the intended party, and would be valid regardless if it were read or not. The report describes this process as unconstitutional, because it violates the right to due process.

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Also, Technical Services believes it would be “arbitrary” to not allow the taxpayer to define how to be notified.

But, the excesses do not end here. Taxation also wants the power, contrary to the country’s bank secrecy, and without a warrant, to be able to ask the bank’s credit managers to reveal information on assets used to secure credit at the bank.

Rodriguez told La Nacion he was not aware of the report, saying that the text of the draft bill can be modified.

“It does not matter if the cat is black or white, what matters it that it catches mice … if the Technical Service says we have to fix some things, we are in the best position to review them, and that they are corrected and we can move forward, not let this get bogged down, because in the end we all end up losers,” said Rodriguez.


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