NO to Financial Transaction Tax

In Costa Rica, the Alvarado administration would be considering the creation of a tax on each transaction that a person or company makes through a financial entity, a tax that will discourage savings and motivate people to use cash.

Thursday, September 17, 2020

In order to discuss a medium and long term credit with the International Monetary Fund, the Costa Rican authorities would be planning to design and create a new tax, which consists of each person paying a tax of ¢3 for every ¢1.000 in the transactions they make through a bank, finance company, mutual fund, stock exchange or any other financial entity.

See "Financial Services: Business Potential in Central America"

After learning of the government's intentions, the Costa Rican Banking Association (ABC) has expressed its rejection of the proposal, since this type of collection will encourage unbanking in the country.

Mario Gomez, legal advisor to ABC, told that "... The banks recognize the serious situation the country is going through and have made great efforts to support the most affected sectors, but it seems to us that this tax, in which the financial entities would be collectors, has negative implications for all clients, regardless of whether they are individuals or companies. Moreover, it would come in the midst of a very difficult situation, a product of the crisis generated by the COVID-19 and the country's fiscal situation."

According to the banking union, with these collections people and companies would learn to avoid paying the tax, generating capital flight to offshore accounts and leading to growth in the informal sector.

Gomez added that "... a new tax in the current situation is undoubtedly a blow to Costa Ricans and a setback in the process of banking penetration that financial institutions have promoted for years."

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