"The odious ‘solve et repete’ ... is a means often used to cover administrative arbitrariness and makes defense of the taxpayer something illusory."
The quote comes from an the article in Elfinancierocr.com citing the OEA/BID Model Latin American Tax Code of 1968, which the author points to as the basis of the Code of Tax Rules and Procedures of Costa Rica.
The international legal consulting firm will be responsible for representing Costa Rica in the process of issuing Eurobonds.
A press release from the Ministry of Finance of Costa Rica reads:
Arnold & Porter LLP is the international legal consulting firm which will be responsible for representing the country in the process of issuing Eurobonds, reported the Minister of Finance, Edgar Ayales this afternoon.
The international debt issuance, approved on Aug. 23 by the Legislative Assembly of Costa Rica, will be put on sale in November.
This was stated by the Minister of Finance, Edgar Ayales, who said they have not yet defined where ir will be issued, or who will be the underwriter. He added that contact will be resumed with the banks who may structure the issue, in order to begin preparing the bidding rules.
There is no such thing as a free lunch. What is being borrowed today so that the state can continue carrying on with its criminal rate of consumption, will have to be paid for tomorrow, of course, with interest.
The analyst Juan Carlos Hidalgo, on his blog Por la Libre in Elfinancierocr.com, rightly describes the issuance of Eurobonds that the Costa Rican Congress has just approved, as what it really is: A deferred tax package.
Legislative approval will allow the government to take advantage of the record minimum rates in the international market, easing pressure on interest rates in the domestic market.
It will also decrease the pressure to solve the underlying problem, which is excessive government spending, especially that generated by the staff payroll, which not only continues to grow in quantity but also in the amount of their wages, on average far exceeding those of private sector workers.
The new standard adds control instruments and powers for the Ministry of Finance, regulating the lifting of banking secrecy by court order.
The new plan also proposes agreements to exchange tax information between the country and other nations, with the government aiming to removing Costa Rica from the gray list of the Organization for Economic Cooperation and Development (OECD).
The country's economy, which has not yet recovered from the crisis of 2008, will suffer from a deficit for which the government can not find effective solutions.
The unbridled growth of government spending in recent years, growth which has only just been moderated, has brought the fiscal deficit to 5% of GDP annually. The proposed tax reform that President Chinchilla presented to the Costa Rican Assembly is not only a legal and political quagmire, but if approved, would not solve the problem of the public deficit, because of the cuts made to the original project.
The National Economic Council has approved a loan agreement between the Ministry of Economy and Finance and the International Construction Bank, designed to improve fiscal management.
A press release from the Ministry of Economy and Finance reads:
The National Economic Council (CENA) has approved a loan agreement for up to B/.100.000.000.00 million ($100 million), between the Ministry of Economy and Finance (MEF) and the International Construction Bank (BIRF), aimed at improving fiscal management and efficiency in public spending.
The Internal Revenue Service (DGI) has added controls in order to increase revenues by chasing evaders and offenders.
Capital.com.pa state in their article that, "Preliminary investigations show that there are cases of companies that have been double billing and creating dubious loss statements, among other things, which is at odds with good corporate practices, giving a reason for DGI to implement the measures allowed by law."
Slow recovery tied to a lagging U.S. economy, 3% growth in 2010 due to increased domestic consumption and rising remittances and international trade.
The countries in Central America are recovering gradually, led by a rebound indomestic demand (following its sharpcontraction in 2009), which has partly spilled over into imports. Pickups in exports and morerecently remittances have been further positive developments.
Central American countries still need to improve their economic performance to reach investment grade ratings.
On its Quarterly Country Risk report for June 2010, the Central American Monetary Council (SECMCA), notes that Moody’s Investor Service improved the foreign currency risk ratings for Guatemala and Nicaragua. For Guatemala, the criteria for this improvement included a stable macroeconomic environment, backed by prudent fiscal and monetary policies, and for Nicaragua improvement in debt indicators and low fiscal deficits.
The Costa Rican congress approved a $500 million loan from the World Bank to service the country’s public debt.
In the first five months of 2010, Costa Rica’s public debt reached $8 billion, including foreign and domestic.
Laprensagrafica.com reported that “Guillermo Zúñiga, former Treasury Ministry and current Congressmen, explained that the loan was negotiated with ‘very favorable’ conditions for Costa Rica: 30 years plus a grace period of five more, and less than 2% interest rate”.
In the first five months of 2010, the fiscal deficit was $670 million, 86% more than the same period of 2009.
An article in Nacion.com notes that “the deficit accounted for 1.93% of the country’s production. The Treasury expects the deficit to represent 4.8% of the GDP by the end of the year”.
Meanwhile, tax revenue grew just 5%, mostly in sales taxes, as the country leaves the worst of the economic crisis behind.