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Costa Rica: Numerous Sectors Oppose Government Tax Plan

[All links lead to Spanish language pages except when otherwise noted]

At the moment, the priority for the Costa Rican government is to pass a tax plan named “Solidaridad Tributaria” (Tax Solidarity) (See hashtag #planfiscal), and as a result, it has gone so far as to leave the agenda for the Legislative Assembly (Congress) blank, so that only this subject can be discussed.

However, different sectors of society, political parties and businessmen have declared their strong opposition to this fiscal reform, which was halted by an action of unconstitutionality imposed by Luis Fishman, a member of the opposition. This appeal is founded on the fact that the “vía rápida” (fast-track), as it is called by Congress, does not allow members to have a good enough look at the plan. The fast-track is used for priority projects and it reduces the margin of time for discussion about voting on a law.

Ciitzens also raised their voices against the tax package, and on December 13, more than two thousand people marched to the Legislative Assembly to demand it to put an end to the plan. The point that generated most disagreement was the proposed change of the 13% sales tax, which applies to consumer goods, to a value-added tax of 14%, which would also include the services that have, so far, been exonerated from any changes.

Criticism of the Fiscal Plan during the protests by indignant Costa Ricans 11 November 2011. Photo: Luis Diego Molina.

Blogger El Chamuko wrote about the movement against the plan in El Infierno en Costa Rica (The Inferno in Costa Rica):

Este Chamuko ve con buenos ojos que al fin se lograra articular en un solo movimiento a los sectores populares contra este garrotazo gestado por el pacto PALI [“el pacto PALI” es un apodo que se utiliza en redes sociales para denominar el pacto que realizaron el partido gobernante Liberación Nacional y el Partido Acción Ciudadana, segunda fuerza política del país, que desembocó en el Plan Fiscal que se encuentra en estudio]. Este Chamuko cree firmemente que el gobierno debe recaudar bien los impuestos existentes y eliminar completamente el 70% de evasión fiscal, y esto no se logra cerrando soditas y tiendas de tarjetas, son necesarias acciones más contundentes para agarrar a los grandes evasores.”

Chamuko clearly sees that in the end the public sectors will manage to come together in a single movement against the blow dealt by “el pacto PALI” (the PALI pact) [“el pacto PALI” is a nickname used by social networking sites to refer to the pact carried out by the ruling Partido Liberación Nacional (National Liberation Party) and the Partido Acción Ciudadana (Civil Action Party), the second political force in the country, which culminated in the Fiscal Plan found in the study]. Chamuko strongly believes that the government must collect up the existing taxes and completely eliminate 70% of tax evasion, and this won't close the cafes and the gift-card shops, more severe actions are necessary to catch the big tax evaders.

The syndicates that called for protests warned that it would continue until next year, regardless of whether party members approve the plan. On the webpage for the Association for Teachers of Secondary Education (APSE), an important syndicate, affirms that:

Si el proyecto es aprobado en primer debate antes del 24 de diciembre, no nos cruzaremos de brazos; las acciones de protesta seguirán en el 2012, aun cuando la Sala Cuarta declare que no contiene vicios de inconstitucionalidad”.

If the project is approved before December 24, we will not fold our arms; the protest action will continue in 2012, even if the Fourth Chamber declares that it does not contain unconstitutional faults.

On the same day as the protest, the  University Council of the University of Costa Rica issued a statement which expressed that the plan “is inconvenient for the country” and it appealed to the government to combat tax evasion (click here to see the statement as a .pdf). Previously, business groups were also opposed to the plan [en].

Against this background, the government's aim of approving this project before the end of the year has been greatly complicated. Costa Rica will close out 2011 with the largest fiscal deficit in Latin America, putting the government firmly between a rock and a hard place on this issue.

Aware of the urgent need to find solutions to this dilemma, David Solís, a citizen, commented via an opinion article published in the digital magazine Amauta:

Los sectores populares estamos dispuestos pagar impuestos pero que sea de forma equitativa, lo cual implica derrotar este plan fiscal y generar un real acuerdo social respetuoso para las familias trabajadoras donde el Estado perciba más impuesto por un proyecto que rompa la regresividad de los impuestos actuales y de los propuestos por el PLN-PAC.”

The public sectors are willing to pay taxes as long as they are fair, which would imply a need to end this fiscal plan and generate a real respectful social agreement for working families, where the State receives more tax for a project that breaks the current regressive taxes and the proposals of the PLN-PAC.

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