Despite a severe economic crisis, Costa Rican authorities have approved the imposition of a 1% VAT on several foodstuffs in the basic food basket, and 4% on certain tourist activities and construction services.
Before the emergence of the pandemic, the Costa Rican economy was already in a difficult state, and the impact of the covid-19 outbreak ended up hitting it in the worst way, which is evident in the performance of productive activity.
With the Nicaraguan authorities confirming that they will review the Tax Agreement Law again in 2020, the business sector is calling for the correction of several measures that have decapitalized companies operating in the country.
On February 27, 2019, the reform to the Tax Harmonization Law was approved, which consisted in raising income tax from 1% to 2% for medium sized companies with higher income, and from 1% to 3% for large taxpayers.
Since October 1, Costa Rican producers and suppliers in the agricultural and fishing sector have a special regime for declaring and paying VAT, which provides that coffee producers, sugarcane and beekeepers will make an annual declaration.
The new Special Agricultural Regime (REA) does not change fiscal obligations, but it allows them to be adapted to the particularities of production processes, so as to facilitate compliance, informed the authorities.
Although Costa Rica and Nicaragua approved fiscal reforms this year, it is predicted that the expected results in terms of tax collection will not be achieved.
The document "Centroamérica: análisis sintético, por país, del desempeño de la recaudación tributaria en 2019", prepared by the Instituto Centroamericano de Estudios Fiscales (Icefi), explains that, in the case of Costa Rica and Nicaragua, the expected results in terms of improved collection are still in doubt.
In the government's review of Nicaragua's tax reform that has been in place since February, businessmen consider that no tax cuts will be made, even though production costs in the country have risen considerably.
After the approval on February 27, 2019 of the amendment to the Tax Concertation Law, which consists of raising from 1% to 2% the income tax for medium sized companies with higher income, and for large taxpayers from 1% to 3%, the productive sector has reported increases in its production costs.
Businessmen in the industrial sector in Nicaragua say that since the tax reform was implemented in the first quarter of the year, employment has fallen between 30% and 35%.
On February 27, 2019 was approved the amendment to the Law of Tax Concertation, which consists of raising from 1% to 2% income tax for medium enterprises with higher income. Another of the measures contemplated by the reform is to raise the income tax of large taxpayers from 1% to 3%.
Although Costa Rica's fiscal reform has already been approved, the IMF proposes raising some taxes as part of an "additional adjustment" to reduce debt and ease financial pressure in the short term.
"... “We are negatively surprised by the simplistic position of the International Monetary Fund that in the absence of money, taxes should be raised, we consider those words unacceptable, because it has been demonstrated in this country that a large part of the deficit is because of the inefficient use of public funds and an issue of state efficiency that does not allow people to become businessmen," said UCCAEP President Gonzalo Delgado."
The law that criminalizes tax evasion was approved by the National Assembly when the amount defrauded in a fiscal period of one year is equal to or greater than $300.000.
With a majority vote, Project 591, which criminalizes tax evasion in the Criminal Code and is considered a crime resulting from money laundering, was approved in the third debate, informed the Legislative Assembly.
In Nicaragua, the government plans to increase employer, labor, and state Social Security contributions, and to approve a tax reform that would increase taxes for medium and large companies.
Although the country has been in a serious economic and political crisis since April 2018, when the government tried to implement reforms to the Nicaraguan Institute of Social Security (INSS), the Ortega administration is once again trying to make changes to the institution, this time through an administrative resolution.
Alvarado administration celebrates the approval of the tax reform in Costa Rica by announcing a series of initiatives that include, among other things, a public employment reform Project.
After a year of proceedings in Congress and after having been reviewed by a Constitutional Chamber, the country's Assembly finally approved file 20.580. By endorsing this project, the government intends to strengthen its public finances through changes made to the taxation system.
The tax reform law that would be approved in second debate in the coming weeks, involves the exoneration of arrears and penalties for taxpayers who pay their debts in the first three months after the publication of the law.
The proposed measure consists of exonerating 100% of the interest on arrears and up to 80% of the penalty to taxpayers who pay in the first month after the Law is published in the official newspaper La Gaceta.
The tax burden grew from 13.4% in 2013 to 14% in 2016, both due to the delayed effect of the tax reforms in Honduras and Nicaragua, as well as better management on the part of tax entities in Guatemala and Panama.
From the Regional Economic Report (IER) 2016-2017: Opportunities and challenges for Central America, by the SIECA:
The good functioning of the institution in charge of collecting taxes is vital for ensuring economic development, as it means that honest companies who comply with their fiscal obligations are not at a disadvantage to those who don't.
EDITORIAL
In Costa Rica, better administrative management has made possible better income tax collection figures than those foreseen with simple tax increases.
The proposal raises income tax from 25% to 29% for profits of over $38 billion a year, royalties for extracting gold and silver from 1% to 10%, taxes on fuels and a tax of $0.65 tax per bag of cement.
Seedocumentby the Ministry of Finance of Guatemala with details on each tax increase.