Costa Rica’s Delayed Tax Bills Expected to Reach Congress in May

Costa Rica’s government may present long-delayed bills to congress next month to turn the country’s sales tax into a value-added tax and change the income tax code as the Finance Ministry reviews adjustments to the proposals.

Lawmaker Otton Solis, head of the congressional finance committee, said the proposals are expected to reach the legislature “in the second part of May” and that lawmakers will discuss two bills to crack down on smuggling and tax fraud in the meantime.

The government floated drafts of the legislation in March to change the 13 percent sales tax to a value added tax and raise the rate to 14 percent next year and 15 percent in 2017. The income tax bill would establish a 30 percent tax on medium and large companies while individuals would pay 10 percent to 25 percent of their net income depending on their tax bracket.

“Support is complicated,” Solis said in phone interview. “The strongest resistance is political, that the government is spending too much,” he said, adding that increasing a value-added tax on basic food items “is going to be controversial.”

Costa Rica’s Union of Private Sector Chambers and Associations criticized the proposed tax increases in April, saying that a 15 percent VAT “would be a heavy increase for the whole population” and calling for a reduction in spending instead.

Costa Rica narrowed its first quarter primary deficit to 0.86 percent of gross domestic product from 0.92 percent last year and recorded a total budget deficit of 1.5 percent of GDP through March, unchanged from a year ago.

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