The bill was approved on its first reading; the final vote depends on the decision of the Constitutional Court over an appeal on the legislative process.
After 15 months in the drawers of the representatives of the Legislative Assembly, the tax reform bill passed on Wednesday in the first debate with the support of 31 MPs and 19 votes against.
"If approved, the Government would have tools to collect the equivalent of 1.5% of GDP (about ¢350,000 million, some $687.82 million) in new taxes, through a tax on value added (IVA in Spanish) and reforms on income and the selective consumption tax, among other changes," reported Nacion.com.
In order to fulfill his campaign promises, the new president, Otto Perez Molina, must achieve consensus for the approval of a tax reform.
For the former vice president of the Banco de Guatemala (Banguat), Mario Garcia Lara, the priority is "to bring order to public finances."
The journalist Lorena Alvarez summarizes in her article in Elperiodico.com.gt, opinions of analysts, economists and representatives from the private sector, regarding the new government’s priorities.
And apparently for bureaucracies in general, including those of international organizations; an "expert" from the Inter-American Development Bank is supporting tax reform in Costa Rica.
Although officially the IDB "does not advocate a tax burden or specific tax policy," one of its officials warmly supports the project to increase the tax burden to support the Costa Rican economy, to the point of suggesting that the tax burden be similar to Argentina’s.
Costa Rican industrialists believe the VAT exemption proposed by the Executive will be ineffective.
A press release from the Costa Rica Chamber of Industry states:
Surprised. This was the reaction of industrialists on learning of the filing of an amendment to the Solidarity Tax Act Project by the Ministry of the Economy and Ministry of Finance, relating to value added tax.
Unions and business associations are insisting that the economy will be damaged if the proposed tax reform is approved by the Executive.
The private sector is objecting to the negative impact that the reform will have on the national productive apparatus and consumers. Unions for their part say the new tax (Value Added Tax, VAT) will affect the finances of Costa Rican families.
Economists and former officials from the government make up the G-40 team, which is promoting fiscal reform.
The team of former Ministers of Finance, economists, former government officials and researchers from different ideological persuasions, aims to resurrect the financial proposal by the Tax Dialogue Promotion Group ("Grupo Promotor del Diálogo Fiscal") which was presented in 2008.
The dysfunctionality of the Costa Rican Congress places further doubt on the feasibility of the adoption of fiscal reforms proposed by Chinchilla’s administration.
The Nomura Group, one of the largest global investment banks, analyzed recent developments in Costa Rica’s National Assembly, and concluded that these are affecting the prospects for the speedy approval of the fiscal reform project led by the executive branch of the government.
Private business leaders spoke out against the creation of new taxes and increasing income tax.
"The private sector struggles between uncertainty and anger, after a study by Eurasia ensures that the Salvadoran Government is expected to approve an increase to the ceiling of income tax, a new estate tribute and a security levy," Laprensagrafica.com reports.
The government admitted working on a new tax reform to broaden the income tax and create new taxes.
With regards to new property tax, Finance Minister Carlos Caceres said it would be applied for the 2012 and 2013 fiscal year.
"On tax reform as a whole, the finance minister said they are still working on it, but there isn't anything formal, in any case he indicated that it could jump-start in the first half of this year," noted Elsalvador.com.
Costa Rica forecasts a 10% deficit in 2016 - more than $ 4.000 million – if the current trend continues without a reform.
As noted by Aldesa, the central government deficit amounted to almost $ 1.970 million. The shortfall means 5.3% of the national GDP and a growth of 73% over the total deficit of 2009, according to preliminary data from the Ministry of Finance.
The project includes sharp increases in consumption taxes and cutting public spending.
The government plans to introduce the fiscal adjustment plan to the National Assembly over the course of the week.
"The adjustment plan, though the term has been carefully avoided by the president Laura Chinchilla, has as focal point an increase in Sales Tax from 13 to 15%, extending it to services such as private health and education as wells as reducing exempted goods from 300 to only 50," reports an article in AFP.
98.28% of surveyed businessmen opposed increased taxes and a potential tax reform.
The survey was conducted by the Chamber of Commerce of Guatemala, and included managers and business owners of the agricultural, commercial, industrial and service sectors.
"Jorge Briz, president of the Chamber of Commerce, said that tax reform would work if taxes were for all taxpayers, including the informal sector'," says the article on El Periódico´s website.
The business sector will present proposals to solve the fiscal deficit, which may also be the foundation of a social pact.
17 proposals will be presented, aimed at two large areas: reducing spending and increasing revenue.
Jorge Daboub, president of the Salvadoran Chamber of Commerce and Industry, explained: “We understand that the country has a serious fiscal problem, the deficit has worsened due to the country’s negative economic situation.