One Step Closer to a Tax Reform

The Costa Rican Legislature has accepted a fast track bill that would transform the 13% sales tax into a Value Added Tax (VAT) and in addition a 4% rate on the purchase of packaging, wrapping and raw materials, among other things.

Archive photo of th eMinister of Finance and Vice President of the Republic, Helio Fallas.

The Impuesto al Valor Agregado (IVA) – in Spanish – bill will open the door for the government to negotiate a US$800 million dollar, with soft conditions, with the World Bank and the Inter-American Development Bank (IDB).

Read more: Costa Rica Urged To Adopt VAT (Value Added Tax)

“If the VAT is approved, we immediately have to start working on two bills, one with the IDB and the other with the World Bank so that we can complement the budget support resources, but at interest rates in half of what it is. it’s paying now, ” said the Ministro de Hacienda (Minister of Finance) and the country’s vice-president, Helio Fallas, on Friday morning.

“The approval of the VAT opens a great opportunity, to have access to more concessional credit than we have now, at relatively low interest rates. I have recently spoken with the people of the IDB and they say that they are ready to start talking about it,” added the Minister.

The bill that could be approved by the Legislative Assembly also includes “… taxes on books in all their formats, air tickets, purchase of packaging and raw materials, as well as equipment and machinery (except if there is an express exoneration) and services for agricultural and agro-industrial production.”

The initiative also contemplates charging a 15% tax on capital gains. The 13% Value Added Tax would be levied on the other assets, with some exceptions and maintaining the exonerations in force.

La Nacion reports that “…The plan also proposes establishing a ceiling of ¢5.4 million colones on the salaries of public officials and the heads of state institutions.

All these measures are to face a deficit of the Central Government that this year is estimated to represent 7.1% of production, and a burden of debt that last year accounted for almost half of the country’s production.

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