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Costa Rica Tax Reform Hits A Dead End
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Costa Rica Tax Reform Hits A Dead End

The control of the legislative directory by the opposition bloc on Monday is sure to kill the tax reform plan introduced earlier this year by the government of Laura Chinchilla.

The opposition bloc, a group of 31 legislators from five different political parties, calling themselves "Alianza por Costa Rica" signed an agreement which calls for thwarting the tax reform plans by the ruling party, the Partido Liberación Nacional (PLN), which does not have sufficient members in the 57 member house for a majority.

The not-so surprising move by the opposition bloc has not been seen in Costa Rica in decades. The opposition say they felt cornered and came together to fight the governments intention to increase taxes to generate badly needed revenue.

The opposition bloc say there are alternative ways to generate revenue without raising taxes, one of which is curb government spending and waste.

The key part of the government's tax reform proposal or "paquetazo" as it is being called, is the introduction of a 14% value-added tax expanded to included goods and services and replace the present 13% sales tax.

In addition, changes were proposed to corporate deductibility and small business tax rules, and the taxation of capital income, which would be harmonized at a rate of 15%. An increase to the tax on vehicles by 10% was also under consideration.

A major fiscal reform plan designed to enhance the government's tax take has been under consideration in Costa Rica for almost 10 years in one form or another, but opposition parties have used all sorts of procedural tricks to block the legislation.

With the latest events in the legislative assembly, it could yet be a considerable time before any changes take effect.

Comments (1)
wpHCGWeightloss says:
Here have a lot of info about Costa Rica Tax Reform! I assume that a major economic improvement plan calculated to improve the government’s tax take has been under thought in Costa Rica. Thanks a lot :)
05/27/2011 11:35 AM