Juan Carlos Hidalgo, in his blog at Elfinanciero.com, begins his article calling the 2011 budget approved by the Legislative Assembly as “illegal”. He explains that current expenditures are included as investments, which is specifically prohibited by the National Budget Law.
Hidalgo, project coordinator for Latin America at the Cato Institute in Washington D.C., outlines the consequences expected in the Costa Rican economy and particularly in the productive sectors, by increasing government spending, which grew 14.5% in real terms compared to last year's budget. The amount represents almost 30% of the Gross Domestic Product.
"Increased government borrowing also means higher interest rates because the state monopolizes the credit, leaving less available to the private sector. Just what you the productive sector needs at the moment as the economy flirts to relapse into recession: more taxes and higher interest rates."
Uncertainty about approval of the tax package in the National Assembly makes the national debt situation unsustainable.
The General Budget of the Republic for the Fiscal Year 2012 was presented by Finance Minister Fernando Herrero, who admitted that 45% of the $11,500 million to be financed will be provided by issuing public debt.
Finance Minister Fernando Herrero said that "our efforts should be focused on increasing tax income through administrative and legislative measures".
Herrero is working on a tax reform bill, which aims to unify previous projects into one update. Now, through a press release, the minister announced administrative measures: "a renewed effort in collecting the tax delinquent portfolio (which amounts to more than $ 13 million), a more intense audit of high-risk groups from an evasion point of view (liberal professionals, medium-commerce), informal businesses and combating smuggling. "
Greece had a 13% fiscal deficit and made the world tremble. Costa Rica’s deficit could reach 10% by the end of 2011.
Heads of households know it well, but authorities sometimes forget: you shall not spend more than you earn; a sacred rule for good management and honesty. Because it’s very easy to spend without reserve on election year, and pass onto the next government a serious problem, one almost impossible to solve without heavy social tension. Just check out what’s going on in the streets of Greece right now.
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