Government tightens belt to promote tax proposals

The central government announced an austerity plan Tuesday and said it would increase collection of taxes.

Government spending and weak enforcement are two major arguments against the Chinchilla administration plan for a 15 percent value added tax and other increases. The plan for new taxes to be presented next Monday to lawmakers.

Casa Presidencial said that the 2011 budget would be cut across the board by 20 percent and that vacant positions would not be filled. In addition no new positions will be authorized except in education, security and other strategic programs.

The across-the-board cut would not include pensions and interest on the public debt. However, transportation, travel outside the country, unjustified advertising, food, beverages and social expenses would be cut.

The Ministerio de Hacienda also would seek to oversee purchases by the state so the best price would be paid, said Casa Presidencial.

The Ministerio de Hacienda also will increase by 20 percent oversight of existing funds and the collection of money by state agencies such as the aduana, customs. In addition, a 20 percent increase is being authorized in tax audits, investigations, verification of the origin of merchandise and other types of controls.

Hacienda also is supposed to come up with a plan to speed up the resolution of tax debts and to collect them. The Fiscal General is supposed to assemble a prosecutorial team to pursue tax evasion cases.

The government also will seek to stimulate the use of credit cards and debit transactions because such payments leave a clear trail tax police can follow. A decree is expected on this in April.

The aduana or customs agency is supposed to set up a system to establish value on imported items starting with the 40 top import categories.

The government outlined the entire plan in spreadsheet form. Among the steps is a review of real estate values. This, too, will be the subject of an April decree.

The government said it expected to save 15.5 billion colons by reducing the budget 20 percent.

That’s about $30.6 million. By not filling vacant positions the government expects to save 8.7 billion colons, about $17.6 million.

The government also plans to swap international debt by giving preference to lower interest borrowing.

The plan also calls for President Laura Chinchilla to veto legislative expenses that do not cite the source of the funds. The government also will go to court in an effort to have certain earmarked expenses declared unconstitutional.

The central government faces a hard sell in the legislature because it is proposing dramatic tax increases in a time of financial struggling. The Hacienda and its tax collecting Tributación Directa has been slow to collect all that the law allows.

For example, foreigners have been able to close out corporate accounts after selling expensive real estate without paying the obligatory 15 percent on distributions.

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