After recognizing the serious liquidity problems faced, the government has announced it will borrow another $1 billion for a hearty lunch that others will pay for tomorrow.
The $1 billion that the Central Bank of Costa Rica (BCCR) has been negotiating since May with the Latin American Reserve Fund (FLAR) to strengthen its reserves will arrive in October of this year, according to the BCCR authorities.
A proposal has been made to raise the "Marchamo" (vehicle ownership tax) and selective consumption tax on vehicles in order to finance the construction of the modern train system which the Solis administration insists on implementing.
Despite the fact that last year proposals very similar to this were rejected in the Legislative Assembly, the Solis administration insists on raising funds to finance the construction of a modern train for the Greater Metropolitan Area.
As in old fashioned patriarchal homes, if there must be suffering, the first to suffer are the stepchildren, and only afterwards, if necessary, the legitimate children.
EDITORIAL
The announcement by the Solis administration that it has a plan B in case it does not manage to get legislative approval for the proposed tax increases designed to address the serious and growing fiscal deficit, highlights the existence in Costa Rica of first class citizens and second class citizens.
The Chinese government has announced that it will not buy bonds worth $1 billion offered by Costa Rica, seriously delimiting the leeway that the Solis administration has to manage its growing fiscal deficit.
The lack of political conditions to implement greater controls on government spending and to gain approval for a fiscal package which would tidy up state finances is preventing multilateral lenders such as the World Bank or the IMF from lending money to Costa Rica, meaning that, after the elimination of the option to sell bonds to the Chinese government, Costa Rica will have to resort to the domestic market for funds, which will inevitably push up the cost of money for all sectors, including production.
A bill to improve the fight against tax fraud authorizes the tax authorities to seize the assets and bank accounts of delinquent taxpayers, without a warrant from a judge.
An article in Nacion.com reports that the Technical Services Department of the Legislative Assembly has proposed a rule that "... could affect property rights and the privacy of individuals because it would allow Taxation officials to take possession of any money deposited in bank accounts, income from salaries and pensions. " and all this "... without a warrant, the Tax Administration would be able to seize assets and enter business establishments."
Citing the old concepts of food sovereignty, protection is being given to the inefficient production of the few while the consumption capacity of the poorest is punished.
EDITORIAL
As expected, the government of Luis Guillermo Solís has decided to apply the safeguard measure requested by rice farmers, increasing the tax paid on imports of milled rice from 35% to 62%, which in practice only applies to rice bought in Argentina and Uruguay.
Fitch Ratings is warning that political fragmentation faced by the new government makes correcting the fiscal problem affecting the country very difficult.
The rating agency also highlighted as an issue the fact that "it is not yet fully clear how President-elect Solis will address the fiscal problem."
"The fiscal deterioration involves challenges in stabilizing the budgetary burden and the ability of authorities to respond to external shocks that may come in the future, which could erode the business climate and consumer confidence."
The main political parties running in the upcoming presidential and legislative election point to the need for tax reform.
Johnny Araya, candidate for the Partido Liberación Nacional, believes what should be done is to "create a National Tax Agency (NTA), to improve collection, as a decentralized agency of the Treasury, with a special procurement regime.