The so-called Solidarity Tax Bill was presented yesterday to the Legislature by the Executive Branch.
The initiative seeks to increase tax revenues by 2.5% of gross domestic product (GDP) which, coupled with the implementation of measures to increase revenue and reduce spending, would balance the public budget.
With the changes proposed by the project, the government raised revenues estimates for this item by 0.5% of GDP.
Value Added Tax
With the implementation of this tax, which would replace the existing Sales Tax, tax revenues would increase by 1.7% of GDP.
The increase by 10 percentage points in vehicle tax, and the rise of 1.5% to 3% tax on property transactions would produce the balance of 0.2%, increasing tax revenues to the equivalent of 2.5 % of GDP.
See Summary of Fiscal Reform Project in Costa Rica
Those were the words of the International Monetary Fund after assessing the national economy.
To maintain the current levels of public investment, the Government requires levels of income of 2% of the GDP.
Nacion.com published a fragment of the IMF communique: "It would be convenient to achieve, as soon as possible, a consensus regarding the need to increase income, thus guaranteeing a quick discussion and approval, without delays, of a tax reform".
The Finance Minister began talks with political groups trying to identify a project with as much support as possible prior to presentation.
Fernando Herrero, minister of finance, stated to Aaron Sequeira of Prensalibre.cr that the basics of the first draft of the proposed tax reform is progressiveness and simplicity, with the Value Added Tax (VAT) and Income Tax as the main sources of revenue.
In Costa Rica a new tax reform package includes an attempt to reduce state expenditures by 1% of GDP.
The Finance Minister Edgar Ayales, outlined to Elfinancierocr.com to the details of a new attempt to correct the deficiencies of the Costa Rican tax system, while curing the problems in public finances.
In Costa Rica the looming tax reform bill involves a burden on GDP of double the amount contemplated in the fiscal packages that were not passed in the last 10 years.
Edgar Ayales, Minister of Finance projected that the new tax reform to be introduced by the government needs to generate between 3% and 4% of the country's production."This year's production is estimated at about $50 billion, therefore the percentage amounts to between $1.5 billion and $2 billion," reported Nacion.com.
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