Chinchilla tax plan called urgent and necessary

The nation’s finance minister carried the case for the administration’s new taxes to the legislature Thursday and said that the proposals were urgent and necessary.

The minister, Fernando Herrero Acosta, is the administrations pointman in trying to get the proposals approved by an unconvinced legislature. He was before the Comisión Permanente de Asuntos Hacendarios.

Among other points, the minster said that the nation’s income was already allocated. Education gets 37 percent, social program spending gets 20 percent and security and justice gets 11 percent. The total is 68 percent, and he did not mention debt service.

In addition, the administration increased expenses in naming 2,900 school teachers, 300 police officers and 200, prison guards, he said.

He defended the 14 percent value-added tax as a good way to reduce tax evasion. That is because every entity that pays the tax has an interest in seeking that others pay the tax, too.

The government political party, Liberación Nacional, does not have enough votes to pass the measures without getting votes from opposition parties.

Two opposition parties have proposed their own plans that mainly concentrate on better tax collection.
The proposal also calls for a 15 percent tax on interest, dividends, profits and money sent from outside the country.

“This tax reform is necessary and urgent. We need to confront the fiscal problem in a responsible way and our major challenge is fiscal sustainability,” he told the committee.

The tax plans are designed to be paid by those who have and spend money. For example, private school tuition greater than 110,000 colons ($220) a month is to be taxed under the plan.

Herrero’s Ministry of Hacienda and its tax-collecting agency, Tributación, appears to be having problems collecting existing taxes. The agency reported Thursday that the luxury home tax only brought in 2 billion colons this year, a drop of nearly 25 percent from the year before. This is the progressive tax on homes of more than 100 million colons.

The tax agency estimated that about 10,000 homes in the country were subject to the tax. Only 2,998 homeowners filed and paid the taxes by the Jan. 15, 2010, deadline. The government collected about $5.5 million. That was the first year of the tax.

This year there were 1,400 home owners who paid the tax. That brought in the 2 billion colons, about $4.1 million.

Despite threats when the tax was passed, Tributación does not seem to be seeking out those who did not pay, although those who do not face penalties and interest.

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