The productive sectors are pointing out the negative effects of the planned increase from 13% to 15% in Value Added Tax, and insist on the need to resolve the fiscal problem by cutting state spending.
According to representatives of the productive sector, an increase in Value Added Tax (VAT) will have a negative effect on the economy. For the food industry, the 15% rise could result in the closure of production plants and an increase in informality among businesses.
The average tax burden for the region is 13.4% of GDP, while the average public expenditure increased from 18.7% in 2013 to 19.2% at the end of 2014.
From the Introduction of the report Macrofiscal profiles in Central America, from Instituto Centroamericano de Estudios Fiscales (Icefi):
The fiscal situation has worsened in Central America in recent months, mainly due to a structural lack of sufficient resources to meet the needs of Central Americans and realize many of the commitments made by governments.
A bill that the government plans to introduce in the Assembly before the end of year includes transforming the sales tax and into a value added tax and gradually raising the rate from 13% to 15%.
This increase should be available within two years in order to "... stabilize the size of the gap between government debt and gross domestic product (GDP) from 2019 and safeguard macroeconomic stability. "
Bankers and businessmen are pressuring the government to remove the guideline which aims to retain 1.77% of each transaction as advance payment of income tax, scheduled to start on December 1.
The private sector argues that "...The decision of the Directorate General of Taxation (DGT) ignores the fact that neither card issuers nor financial institutions in the country can be considered as 'withholding agents' as this must be defined by the appropriate Act. "
The Ministry of Finance is working on a bill that aims to review and eliminate tax exemptions that have no substantiated legal justification, and create a new regulatory framework.
According to the Ministry of Finance, income not received in 2013 due to the existence of exemptions and special tax regimes was equivalent to 5.93% of GDP, of which 3.7% corresponds to the General Sales Tax, 1, 9% to income tax and 0.3% for other taxes.
An announcement has been made that as of December 3rd the $29 corresponding to departure tax will be included in the final price of airline tickets.
The tax collected since 2003 by the Banco Crédito Agrícola de Cartago, starting from December will be included in the final cost of tickets, with the aim of simplifying procedures and avoiding the long lines that travelers have to make in order to pay the tax before leaving the country.
Employers say the value added tax of 13% on services will raise end prices of buildings by between 4% and 8%, and propose a differential rate for the sector.
The Costa Rican Chamber of Construction (CCC) states that the construction of a dwelling requires other services such as electricians, plumbers, metalworkers, architects, engineers, and others, which will eventually transfer this 13%, impacting the final cost.
Up until December 31, 2015 a moratorium will be in effect on the payment of the 13% sales tax on recreational tourism activities in Costa Rica.
The tourism sector will accept the new tax on their terms: desiring an alternative draft law as soon as possible, which exempts legislative procedures and exonerates the charges made before the moratorium.
The Ministry of Finance has postponed until December 1 the beggining of the 2% tax which will be retained by financial institutions on card transactions.
The aim of this extension is to give banks more time to adapt their systems and make adjustments seeing as they are the entities that must make the retentions.
The Vice President and the Minister of Finance have insisted that the Assembly adopt a draft law to establish global income and convert the sales tax into value added tax.
This December is the date set for the plan to convert to sales tax into value added tax (VAT) and for the first quarter of 2015, the bill on global income. Also in 2015 a draft law will be submitted on the Framework Law on Exemptions.
Ranging from law suits to revoke the decision, to a request for injunction against the Director of Taxation, legal measures are being taken by the guild in Costa Rica to get the collection of the sales tax suspended.
The decision to charge sales tax on companies offering tourist services, retrospectively since 2009, will generate the "... failure of many businesses," warn the authorities of the National Chamber of Tourism (Canatur).
Authorities from Tributación Directa reported that the sales tax on tourist activities will start to be accrued from September 30th.
Despite complaints by tourism entrepreneurs, Carlos Vargas, director of Tributación Directa, confirmed that the tax, which taxes at 13% activities as "... zoos, spa, canopy tours, hiking trails, bird watching activities, and bungee jumps, among other things, "will begin to be accrued on September 30 this year.
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