A critical view of the simplistic methods used in calculating the tax burden that supports an economy.
When analyzing a tax reform proposal, the first argument considered is what is the percentage of taxes collected by the state in relation to the Gross Domestic Product (GDP) of the country.
Juan Carlos Hidalgo, on his blog at Elfinancierocr.com, shows with solid arguments, the fallacy of comparing, without thorough analysis, the public figures of the ratio of tax revenue to GDP, which leads to erroneous conclusions which usually hide the main problem: the spending inefficiency demonstrated by the state with the money collected through taxes.
If the project is successful, fiscal authorities will have access to taxpayer’s bank account information.
"This is the proposed Law for the Enforcement of Fiscal Transparency Standards, which was yesterday approved by majority at the Committee on Financial Affairs," reported Nacion.com.
The original bill required the intervention of a judge authorizing tax authorities to request information; the new legislation would waive this requirement.
Inevitable fiscal reform will include the implementation of a value-added tax (VAT), which is basically an extension of the existing Sales Tax.
While a sales tax is only on transfers of merchandise and certain kinds of service, VAT is a generic consumption tax on the sale of all goods and services. Usually exemptions and reduced rates are defined for goods and services that form part of the so-called basic shopping basket.
The government’s finances for the first half of 2010 do not look good: expenses are rapidly increasing, income grows little, and the economic recovery is taking longer than expected.
Hopes that a strong economic recovery would increase government revenue are quickly falling apart. Economic activity has slowed down and income has grown just 13.7% while expenditures increased 26.5%.
In the first five months of 2010, the fiscal deficit was $670 million, 86% more than the same period of 2009.
An article in Nacion.com notes that “the deficit accounted for 1.93% of the country’s production. The Treasury expects the deficit to represent 4.8% of the GDP by the end of the year”.
Meanwhile, tax revenue grew just 5%, mostly in sales taxes, as the country leaves the worst of the economic crisis behind.
The objective of the agreement signed between Costa Rica and Argentina is to fight tax fraud and fiscal evasion.
Both countries will exchange fiscal information in a wide array of forms and subjects.
Jenny Phillips, Treasury Minister, told Elfinancierocr.com: "Given the current global economic reality, it is crucial to exchange tax information between countries, to be able to comply with fiscal requirements imposed by the international community".