The new tax reform proposal presented by the Ministry of Finance of Costa Rica includes the creation of a global income system to impose and collect a tax on the profits of companies and individuals.
Taxing all of the profits of natural and legal persons, including those currently paid separately by the identity code income method, is the principal new feature of the new tax reform plan presented by the Ministry of Finance.
In its comments on the bill on income tax and sales reforms currently under public consultation, a request has been made that financial institutions be subject to a system of global and not published income.
From a statement issued by the Costa Rican Banking Association (ABC):
ABC submitted their comments on the draft amendments to the income and sales taxes
Experts warn that the draft law which aims to raise income tax and convert sales tax into value added tax might not be approved for two years.
The lack of consensus between the Ministry of Finance and the President of the Republic, Luis Guillermo Solis, is sending mixed signals on some aspects of the tax reform. One example in the case of corporation tax, an issue that the president himself has stated he disagrees with.
With the reform to the law on Tax Concentration non-resident investors in the country will have to pay 15% instead of 10% on income earned from capital.
According to Juan Sebastian Chamorro, executive director of the Nicaraguan Foundation for Economic and Social Development, the new reform "... is a positive thing for the country because it will generate an increase in the collection of such taxes but is a negative blow to natural and legal non residents because the Revenue Department will no longer deduct 10% on capital transfers, but rather 15 %. "
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.
Based on prior evidence, the much needed fiscal reform in Costa Rica may take a year and a half to become a reality.
The country experienced a fiscal deficit of $997 million in the first 8 months of this year, 70% more than the same period of 2009.
The approval of the fiscal reform promoted by the Chinchilla administration could become a very long process, taking between 10 and 44 months, according to experts.