President says nation’s finances must be sustainable

President Laura Chinchilla said Monday that the country cannot postpone cleaning up its finances if it hopes to maintain for the next 10 years the social right and guarantees it has created.

The various sectors of society have to reach agreement to achieve the sustainability of its public policies, she said, adding that the current tax level “does not reflect the responsibility and obligation of a society like ours.”

The president said that the country has reached the limits of its possibilities because it cannot defend the rights without assigning the resources that transform these rights into realities. To promulgate these rights without offering the means to achieve them is the worse form of demagoguery, she said.

The president is seeking passage of a 14 percent value-added tax and other assorted taxes in a legislature that her party does not control. About half the national budget is borrowed money, and even if she gets all that she seeks, the country’s income will still fall below its expenses.

Although Ms. Chinchilla has sought to freeze jobs in the central government, she has not offered any plan to cut the size of her administration. She was speaking Monday at an event in the Ministerio de Planificación Nacional y Política Económica.

A few hours later, the man in charge of collecting taxes was telling lawmakers that he needs more employees to handle the estimated $10 billion the taxes would bring in. The man, Francisco Villalobos Brenes, was before the special commission that is studying the tax proposals.

Villalobos said there would be a big increase in the number of taxpayers, which is why he would need more employees. He has complained in the past about the Chinchilla administration’s hiring freeze that has kept him from adding more inspectors. He has been in the job less than a year.

He also said that the tax collecting job would be made more complex by the use of the value-added tax. Under that system tax is added at each stage of the production process down to the retail sale. So instead of one tax, there are a series of smaller taxes. The number depends on the steps in the production process.

Villalobos heads the Dirección General de Tributación. He said that his agency needs a
computer system of the first level so that his employees can maintain a census of taxpayers and handle all the tax forms. He said that the Spanish government was ready to help with its international aid agency.

At another legislative committee hearing Monday, lawmakers were considering a $132 million loan from the Banco Interamericano de Desarrollo. The chairwoman of the committee, Jeannette Ruiz Delgado of Acción Ciudadana, explained that the money would be put to work to insure citizen security in an integrated way. Among other plans, the money will be used to build prisons in locations that are what she called the most abandoned areas of the country with the highest social risk.

The money also would be used to build civic centers in these areas with the goal of keeping the youth in the area away from crime, she added. The money also would go to developing a school for police, which is the third side of what the lawmaker said was the third side of the triangle. The Banco Interamericano approved the loan in May specifically for citizen security. To accept the loan, lawmakers have to vote to do so.

“The most important of these loans is that they are for social investment and not to finance expenses,” said Ms. Ruiz Delgado.

The loan would be disbursed over five years, according to the proposal.

Also Monday the business chamber stepped up its attack on the government’s plan to tax firms now located in the so-called free zone. This would diminish investments, said the Unión Costarricense de Cámaras y Asociaciones del Sector Empresarial. A statement said that the country was changing the rules of the game under which many firms came here and made investments.

There are 574 firms in the free zones, and in 2010 they employed 60,000 persons, the chamber said, citing figures from the Promotora de Comercio Exterior de Costa Rica. Workers there averaged a monthly salary of $1,028.90 as opposed to the national average of $637, the chamber said.

The government’s political party, Partido Liberación Nacional, joined in a coalition with Acción Ciudadana and several other legislators to create a tax package that might win passage. The plan also calls for extending the value-added tax to professional services and private education, although the specifies are revised weekly.

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