On December 5th, will begin the period in which the taxpayers who pay their debts in the first three months after the publication of the Law will be absolved of arrears and sanctions.
The publication of the Law to Strengthen Public Finances in the official newspaper La Gaceta marks the beginning of the three-month period for taxpayers with debts to the Ministry of Finance, the Instituto Mixto de Ayuda Social (Imas), the Instituto de Fomento y Asesoría Municipal (Imas) and the Instituto de Desarrollo Rural (Inder) to update their accounts without charging interest and penalties.
Alvarado administration celebrates the approval of the tax reform in Costa Rica by announcing a series of initiatives that include, among other things, a public employment reform Project.
After a year of proceedings in Congress and after having been reviewed by a Constitutional Chamber, the country's Assembly finally approved file 20.580. By endorsing this project, the government intends to strengthen its public finances through changes made to the taxation system.
The tax reform law that would be approved in second debate in the coming weeks, involves the exoneration of arrears and penalties for taxpayers who pay their debts in the first three months after the publication of the law.
The proposed measure consists of exonerating 100% of the interest on arrears and up to 80% of the penalty to taxpayers who pay in the first month after the Law is published in the official newspaper La Gaceta.
In Costa Rica, authorities announced that the procedures to be carried out by importers of medical equipment and supplies to apply for tax exemption will be reduced in ten days.
In Costa Rica, the government approved a decree that exonerates from the payment of the selective consumption tax to second-hand electric cars that are 5 or less years in service.
To encourage the use of electric vehicles in the country, the Alvarado administration signed the Executive Decree 41426-H-MINAE-MOPT, which grants a fiscal benefit to second-hand electric vehicles whose antiquity is equal to or less than 5 years from the year of its model.
The business sector welcomes the progress achieved with the tax reform approval in the first debate, but notes that it does not fully solve the financial problems facing the government.
In the debate last Friday, the representatives approved the file number 20.580, known as the tax reform law. The approval was optimistically received by the Costa Rican Union of Chambers and Associations of Private Business Sector (Uccaep). However, they affirm that several adjustments should be made to public spending to achieve long-term solutions.
"Public debt in terms of simple average for the Central American region will continue growing, reaching 43.1% of GDP in 2018, after having registered 42.5% in 2017."
The Central American Institute of Fiscal Studies (Icefi) estimates that for the current year the size of public expenditure of the Central Government in relation to the respective Gross Domestic Product of each country will be 21.4% in Costa Rica, 20.4% in El Salvador, 20% in Honduras, 18.4% in Nicaragua, 17.6% in Panama and 12.1% in Guatemala.
Entrepreneurs in Costa Rica are warning of the negative impact of not maintaining, in the new law of public finances, the VAT exemption on local purchases of goods and services carried out by free zone companies.
The Association of Free Trade Zone Companies of Costa Rica (Azofras) points out that in the bill to strengthen public finances that is being discussed in the Assembly, motion 302 was not revised, a motion which aims to keep the VAT exemption on the local purchases of goods and services carried out by free zone companies, both to be incorporated into export products and for their operations.Currently the sales tax exemption applies.
In Costa Rica, companies in the agricultural and fishing sectors will not have to use the mandatory electronic receipt system until October 2019.
The government has decided to postpone the entry into force of the electronic receipt system for these two sectors, with the aim of having more time to better implement the system and solve the problem of internet access that several producers claim to have.
Food companies in Costa Rica say that eliminating VAT from the basic basket in the tax reform proposal would create an incentive for imported foods, over and above local production.
The Costa Rican Chamber of the Food Industry (Cacia) reacted to the decision of the deputies to exempt VAT of 1% and 2% on the products of the basic basket in the Bill of Strengthening of Public Finances, which is being discussed in the Assembly.
Leaving out VAT on private education and the basic basket, the substitute text of the bill to Strengthen Public Finances was approved in the legislative committee.
The controversial substitute text of the Bill Strengthening Public Finance that has already passed the first filter, and may now be analyzed by the Plenary of the Assembly, left out two of the taxes that the Alvarado administration intended to implement in its plan: VAT of 1% and 2% on products in the basic basket and 2% on private education services.
The high level of financing and the economic slowdown explain the increase in the fiscal deficit of the central government, which at the end of July reached 3.3% of GDP, the highest in the last six years.
The decrease in tax revenues, due to a slowdown in economic activity, added to the high level of government debt, explained the strong rebound in the fiscal deficit in the first half of the year.Of the total deficit, about two thirds correspond to interest.
The new tax reform proposal being discussed in Costa Rica raises capital gains tax from 8% to 15%, and also excludes recognising as a debt deposits made by issuers in the securities market.
In the view of the National Stock Exchange (BNV), not recognizing deposits made in the stock market as debt leaves it at a clear disadvantage, compared to banks, as a source of financing for companies.Not only does it compromise access to investors' savings, it also significantly limits companies and individuals investment options.
In Costa Rica, more than 20 companies have complained that performance of the Ministry of Finance's electronic receipt system is very poor and that it collapses when companies such as telephone companies process receipts on a large scale at the beginning of the month.
The proposal to increase the tax on interest on financial investments in Costa Rica could eventually make credit more expensive for both the private sector and the government.
In the view of the National Securities Exchange (BNV) it is worrisome that initiatives such as an increase in tax on income from financial investments are being discussed without knowing in detail and clearly the impact that something like this could have on the stock market and the country's financial activities.
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