Costa Rica: Constitutional Tribunal Rejects Tax Reform

The Sala IV has rejected the tax reform bill that was approved in the first instance in Congress, citing procedure errors in the legislative treatment.

Wednesday, April 11, 2012

The court decision means, in principle, that the bill that the government calls the "Solidarity Tax" will be returned for consideration by congressional representatives and it will therefore be at least another four months before it can be approved.

One of the major changes that the project introduces the value added tax (VAT) which will be a 14% levy on the sale of goods and services, replacing, and expanding the tax base from the current Sales Tax which is 13%. Among other reforms are the introduction of the concepts of ‘total income’ and ‘world income’ as a measure to regulate big business.

The adoption of this reform is vital for the Costa Rican government, which in recent years has greatly increased spending, especially on official staff salaries, creating a growing fiscal deficit that the Ministry of Finance will have to cover with more debt issuance .

(From miscellaneous sources)

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