Tax reform: Partial Solution

The business sector welcomes the progress achieved with the tax reform approval in the first debate, but notes that it does not fully solve the financial problems facing the government.

Monday, October 8, 2018

In the debate last Friday, the representatives approved the file number 20.580, known as the tax reform law. The approval was optimistically received by the Costa Rican Union of Chambers and Associations of Private Business Sector (Uccaep). However, they affirm that several adjustments should be made to public spending to achieve long-term solutions.

Gonzalo Delgado, president of Uccaep, said to Nacion.com that "... This legal project (tax reform) is an important step in the right direction. However, it is clear to us that this measure will not solve all of Costa Rica's financial problems. We have to understand that our country is in a complex moment and we need to move forward in solidarity and quickly to find a solution to the financial crisis that is already affecting us."

See "The Unstoppable Public Debt"

Delgado added that "... Costa Rica needs to be organized and move along safer lines in the financial balance, where it is urgent to formalize the informal sector that reaches 44%, support a single pension system, monitor salary bonuses, as it is urgent to reactivate the economy and get the country on its way."

One of the main changes included in the approved law in the first debate is the replacement of the current general sales tax by a value added tax (VAT). With this change, the taxation is extended to services which until now were not covered by the sales tax.

Also see "Tax Reform is Not Enough"

The tax reform project includes tax-exempt services such as professional services, gyms, streaming applications and other diverse services such as Uber and Netflix.

Nacion.com reports that on the subject of salary "... Two new steps are created so that those who earn contribute a higher percentage of income. Now, this collection is made on the salaries superior to ¢817.000 with a 10% or a 15% of the surplus, according to the amount. However, they will be charged up to 25% with the reform." See "This is how the tax reform approved in the first debate was concluded"

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