Tuesday 21 September 2021

The Marchamo and initiatives to reduce it this year due to COVID-19

Three separate bills are in the legislative process, stuck in committee, due to the Government's refusal to give up on the income of the Marchamo

Front PagePoliticsThe Marchamo and initiatives to reduce it this year due to COVID-19

Three separate bills are in the legislative process, stuck in committee, due to the Government's refusal to give up on the income of the Marchamo

(QCOSTARICA) Though November 1 is still a long way off, December 31 more, the first and last day to pay the 2021 Marchamo, for many it implies a severe headache due to the critical situation that families and companies are going through as a result of the impact of COVID-19 on the economy.

The annual circulation permit or Marchamo, that includes a property tax on vehicles, must be paid by December 31 of each year.

In Congress, some legislators anticipated the problem that the payment will represent this year for vehicle owners.

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Currently, there are three legislative bills that seek to lighten the burden to a greater or lesser extent; two are by PLN legislators Franggi Nicolás and  David Gourzong, the third from independent legislator Dragos Dolanescu.

Nicolás proposes to include the transitional article and reform which created the vehicle property tax. Its intention is to reduce the amount of the tax by 20% for all motor vehicles, boats and aircraft.

Nicolás explains in her proposal would a one time only and would not modify other components of the mark such as Compulsory Automotive Insurance (SOA) and the Value Added Tax (VAT ) that is paid in the SOA, or the items that make up the annual Marchamo.

David Gourzong, meanwhile, proposes an exoneration, also for a one time only, from the payment of the vehicle property tax for people who are receiving or have received the Bono Proteger (government aid) created to assist families due to the COVID-19 pandemic.

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The legislator also proposes that the vehicle ownership tax be reduced by 25% for people who prove that they are unemployed, are working fewer hours, or that they have micro-businesses whose income fell by at least 20% because of the national emergency linked to the new SARS-CoV-2 coronavirus.

In addition, the PLN legislator includes in his project a reduction of 25% in the amount destined to the Consejo de Transporte Público that must be paid by businessmen in the tourism sector and those dedicated to transporting tourists, due to the sanitary vehicle restriction in the country since March.

Vehicle owners not circulating with the current Marchamo are exposed to fines and other sanctions that could include the seizure of license plates and vehicle.

Dragos Dolanescu focuses his proposal, also, on the reduction of the vehicle property tax by 50% for the 2021 Marchamo for all owners of motor vehicles, boats and aircraft, without exceptions.

The property tax is the single largest component of the Marchamo and goes straight to the coffers of the Ministerio de Hacienda (Ministry of Revenue), and based on the fiscal value of the vehicle, set by Hacienda.

What the legislators say

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Franggi Nicolás believes that his bill must be approved because families have not only seen their income deteriorate during 2020 with the arrival of COVID-19, but vehicular traffic fell significantly this year due to the restrictions imposed by the Government to prevent further outbreaks of the deadly viral respiratory disease.

“(…) It is fair, not only in view of the uniqueness of this year, which has implied a clear and evident reduction with respect to driving for this period, but it is also a measure that will allow thousands of homes and companies with vehicle fleets, close the year with economic relief given the economic situation that the country is going through as a result of COVID-19,″ the legislator said in support of her bill.

David Gourzong, for his part, justifies his proposal based on the decision of the Legislative Assembly to approve a reform to the Labor Code to allow the reduction of working hours and wages, as well as the suspension of employment contracts to alleviate the situation of companies affected by the pandemic.

“As a result of all this context of calamity and the multiple months in which their income has been devalued due to not being able to work or a substantial decrease in sales (for business); an important sector of the population is in a pernicious economic situation that makes it impossible to face the basic subsistence burdens that they have usually had to face, such as paying rent for housing, commercial premises, buying food and honoring their debts in general. Now the State must show solidarity, provide solutions and take the necessary measures to support the various aspects in which the population has been affected as a result of the global crisis (…),” said Gourzong.

Dragos Dolanescu emphasized the questioning towards the formula for calculating the Marchamo, the way in which the Government updates the values ​​of vehicles, according to him, subjectively, and due to the “manipulation” that, in his opinion, leads to the excessive collection of property tax on vehicles.

He also stated in the explanatory memorandum for his project that Costa Rica charges the most expensive mark in Central America and, even, more onerous than that charged by some European countries.

“(…) Many of the homes in our country will not receive the Christmas bonus corresponding to this year (due to the high unemployment of 24% that worsened with the pandemic), a very regrettable fact and being, as indicated above, the Aguinaldo, that is usually used by most of the workers to pay the Marchamo, it is very likely then that due to the economic precariousness of the homes and the drainage of resources they have suffered, that this year the delinquency will increase and this confiscatory tax will not be paid,” argues Dolanescu.


So far this month of August – in extraordinary sessions, during which the Presidency controls the agenda of issues discussed by legislators – none of the bills has had any movement in the Legislative Assembly, as the Executive Power is opposed to any proposal to reduce the Marchamo, with the argument that a decision in that sense would further widen the fiscal deficit of the Central Government.

The property tax is the single largest component of the Marchamo

The Office of the Comptroller General of the Republic (CGR) estimates that this year the gap between the government’s income and current expenditures will be greater than 11% of Gross Domestic Product (GDP); The Ministry of Finance, meanwhile, estimates that the size of the gap in its finances would be of the order of 9.7% of GDP. In any case, the country has not seen such high levels of fiscal deficit in many decades.

The Minister of Finance, Elian Villegas, affirmed at the end of July that the Marchamo is a “fair tax” and that “it makes no sense” to reduce it in the midst of the crisis facing the country.

In addition, he opined against the proposals that are based on the argument of the reduction of the time of circulation of the vehicles this year, which he considered as a “conceptual error” because, in his opinion, the tax is not charged on the effective use vehicle.

During an open discussion that he held through social networks, President Carlos Alvarado ruled out that his government supports any proposal to cut a percentage of the Marcahmo to help families and companies cope with the dire economic situation.

“On the issue of the Marchamo, I know that relief would be desired. But, as the same Minister of Finance (Elian Villegas) has said, taking away this type of income is to undress a saint to dress another. Because those monies, anyway, are allocated for things that are in support of the country. This is one of the most complex situations we have in terms of public resources (…),” justified Alvarado.

The CGR also turned on the warning lights on bills to reduce the cost of the Marchamo this year, sending legislators in mid-July two criteria in which it underlined the dangers involved given the government’s fragile fiscal situation.

In the opinion of the CGR, the tax on vehicle ownership will be reduced this year, among other reasons, because inflation has a downward effect in the current economic situation, as in June the indicator was at a -0.24%.

If, on top of this, legislators approved the exemptions, the CGR pointed out, the bills would contribute to worsening the country’s fiscal situation.

Despite the Government’s refusal to give up on the income of the Marchamo, legislators of various fractions announced that as of September, when they regain control over the legislative agenda, they will restart the processing of the bills, which are currently stalled in the Tax Affairs Commission.

The 2019 government take for the Marchamo is estimated at ¢250 billion colones. The Treasury alleges that half of the income from the tax goes to the National Highway Council (Conavi), which is in charge of maintaining the roads, and the other half goes to the general government coffers to pay expenses.


"Rico" is the crazy mind behind the Q media websites, a series of online magazines where everything is Q! In these times of new normal, stay at home. Stay safe. Stay healthy.

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