Tax on passive investments seen causing capital flight

Representatives of the financial sector were at the legislature Wednesday expressing concern that the new tax package would cause the flight of capital.

The Chinchilla administration proposal would tax passive investment income at 15 percent, noted Lanzo Lusconi, president of the Cámara Nacional de Sociedades de Fondos de Inversión. His organization has more than 100 investment firms as members, and they handle some $2.8 billion. Members include state banks, the Instituto Nacional de Seguros and private firms.

The tax on investment income varies considerably now from 0 percent to much more. The tax proposal would establish a uniform 15 percent rate. This would include investment income and also income from rental properties.
Lusconi said that the proposal might cause investors to
move their funds to other countries.

He cited Panamá and the Dominican Republic.

He also noted that the major issuer or financial instruments in Costa Rica is the state itself, so the tax would translate to higher costs of borrowing for governmental purposes.

He was testifying before the Comisión Permanente de Asuntos Hacendarios, which is considering the central government proposal.

Lusconi also noted that the tax proposed would be assessed over the gross income from investments and there would be no deductions for expenses under the current text of the bill.

Currently intangible investment funds are controlled by the Superintendencia General de Valores and closely followed, so there is no chance of tax evasion, he said.

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