Taxes and the Stock Market

The proposal to increase the tax on interest on financial investments in Costa Rica could eventually make credit more expensive for both the private sector and the government.

Monday, August 13, 2018

In the view of the National Securities Exchange (BNV) it is worrisome that initiatives such as an increase in tax on income from financial investments are being discussed without knowing in detail and clearly the impact that something like this could have on the stock market and the country's financial activities.

In a statement, the BNV said: 'The stock market represents a significant source of financing for the Government. Making credit more expensive, as a consequence of the application of the tax on interest, would have an important recessive effect which would affect all sectors of the national economy'.

In relation to the increase in taxes on stock market activity, Crhoy states that the sector " ... points out that doubling the tax to which these yields are subject will impact the cost of the debt issued by the Ministry of Finance and that will have to be assumed by the other entities that issue securities in our market. The increase would be such that it would represent a cost similar to that which the country would face in light of a decrease in the sovereign risk rating."

The BNV adds that if a higher tax burden is approved for the sector, the country's middle class " ... will be directly hit by the increase in payments for their credit obligations. Rises are foreseen in installments for loans for housing, vehicles and debts held on credit cards. All this just at the moment when households' disposable income will be reduced because of higher taxes on the services they consume." 

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