Saturday 28 January 2023

VETO: Carlos Alvarado says no to Marchamo reduction for this year

The president puts the brakes on the law approved by legislators, who must now jump hurdles to be able to pass a reformed reduction

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28 January 2023 - At The Banks - BCCR

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QCOSTARICA – After asserting that it would be harmful to the country’s finances, Carlos Alvarado on Friday vetoed the reduction in the 2022 Marchamo

The President of the Republic, Carlos Alvarado, announced this Friday the veto of the reduction approved by the deputies in the 2022 mark. The deputies could reseal the project with 38 votes, but only if the same Executive Power calls the initiative in extraordinary sessions . Photo: (Rafael Pacheco Granados)

“At first glance, the reduction might seem like it helps the finances of people who own a car. But it was not done well. Because they did it without compensating for the loss of that income, which causes a budget gap. From Congress, the Marchamo could have been lowered to lower value cars and raised to luxury cars, for example. But that was not the path that was taken, and that generates a loss of resources that the country urgently needs at this time.

“What is approved creates a budget gap and would send a negative message to the markets that would put the country’s economic stability at risk. And it also goes against the objectives of the agreement that we have reached with the International Monetary Fund (IMF) to stabilize the economy,.

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“The duty of a ruler is to protect the people and the entire country, against obvious damage, of course, but also against things that at first glance seem good but are, in reality, harmful. In fact, because of that kind of thing, because of decisions made in the past that were not good but looked pretty, is that privileges or unfunded spending were created; and that is why the country ended up in a serious fiscal shortfall and a very high debt. We have been fighting for 3 years to rectify these problems accumulated for decades, and there is still more to do because no party is free,” said Alvarado.

Read more: Legislators describe the president as capricious and insensitive

According to the President, the reduction approved by legislators the Friday before last would leave a gap of ¢30 billion colones.

Alvarado added that he is willing to bear the political cost of his decision in order, according to him, to continue the path of fiscal consolidation. “It’s not about avoiding tough decisions to seek momentary popularity,” he said.

The bill establishes a reduction of the property tax on vehicles that ranges between 9% and 45%. Also, forgive the payment of the 2021 arrears backwards if the owner pays the corresponding amount for the next year before January 1.

With the scale of discounts approved by the legislators, the owner of a passenger vehicle, for valued at ¢5 million, for example, would have saved ¢24,330; the owner of a car valued ¢15 million would have paid ¢ 44,330 less.

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The collection of the 2022 Marchamo starts on November 1 as mandated by law, when the Instituto Nacional de Seguros (INS), opens the portal for payment that is due by December 31.

The veto

The veto came as no surprise. The President had been silent on the subject since the bill was approved and sent to Casa Presidencial for his signature, to which he had three options: sign, veto or do nothing, which would have the same effect, rendering the bill moot given that its passing into law would be way past November 1.

According to the rules of the legislative process, without the presidential signature, initiatives do not scale to the level of the law.

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The veto requires initiatives to be resent to the legislature with reforms, which then requires discussion and approval before it can be resent back for the presidential signature.

The 2022 Marchamo bill is time-sensitive. There still is the possibility that the bill, with the changes, is quickly dealt with by the legislative commission that first dealt with the proposal and makes it to the legislative floor, discussed and passed on Monday, an action called “resello”, and back to Casa Presidencial for the president’s signature and published in La Gaceta Tuesday morning.

In that case, the INS could be, as it occurred last year postpone the collection until November 2.

However, the “resello” is highly unlikely given that on November 1, the Government takes control of the legislative agenda with the extraordinary sessions. In this case, the bill would first require the affirmative vote of 38 of the 57 legislators (supermajority).

Fees and refunds

If the legislators are able to complete the “resello” after Monday, the reduction in the 2022 Marchamo can still occur.

The Executive President of the INS, Gabriel Pérez, explained how they would proceed if the reduction is final after November 1.

“We would have to stop the operation, that is, stop the collection of the Marchamo; then make the corresponding adjustment, once we have the information. We would be spending a day updating our system so that it can once again continue with the collection,” he said.

For those who paid the Marchamo prior to a reduction, if it were to occur, they would have to file a claim for a refund to the Ministry of Finance.

While the INS is the collector of the property tax on the Marchamo, the funds are transferred to the Tax Department, who then would have to issue the refund.

Although he was asked at a press conference about the maximum date to implement an eventual reduction in rates, the INS president did not respond.

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