Tuesday 28 March 2023

Why would it be negative to establish a tax on bank transactions?

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25 March 2023 - At The Banks - BCCR

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(QCOSTARICA) Passing new taxes proposed by the government of Carlos Alvarado on bank transactions would make goods and services more expensive and companies’ payroll would increase.

“A new tax in the current situation is undoubtedly a blow for Costa Ricans and a setback in the banking process that financial entities have promoted for years,” said Mario Gómez Legal Advisor of the Asociación Bancaria Costarricense (ABC) – Costa Rican Banking Association.

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According to the ABC, there would be negative consequences of the tax:

  • Disincentives saving and motivates people to use cash, that is, favors unbanking
  • Over time, people and companies learn to avoid paying the tax
  • The use of more cash puts citizens at risk from criminals
  • Generates capital flight to accounts abroad (offshore)
  • It leads to growth in the informal sector, which ends up also damaging the Caja
  • Depending on how the tax is raised, it could have a cascading impact on production costs and prices to the final consumer.
  • The World Bank has established in various studies that the use of credit or debit cards not only reduces the cost associated with the use of cash by almost 50%, but they also become mechanisms that facilitate financial inclusion, therefore a project of this nature undoubtedly goes against these recommendations

Economists, businessmen and legislators warn the Government of the dangers of including aspects such as world income or taxes on banking transactions in the negotiations with the International Monetary Fund (IMF).

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Q Costa Rica
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