Minister breaks with adminstration on free zone tax

Anabel González, the minister of Comercio Exterior, warned lawmakers Monday that changing the rules of the game for industrial free zones could have major consequences.

She appeared before a special committee studying the measure that would assess a 15 percent tax on the distribution of dividends sent outside the country by companies located in the free zones. That would take affect in 2015. The tax proposal also authorizes municipalities to assess up to $100,000 in taxes against free zone firms. Most firms are subsidiaries of companies located elsewhere.

Nearly all of the firms here produce products for export.

Although Costa Rica has a good climate for investment, said Ms. González, there are other countries that offer such firms free land and buildings and also pay part of the company’s salaries. She said bringing investments to Costa
Rica was not an easy job.

She noted that lawmakers just reformed the free zone law in 2010.

The testimony of Ms. González is about as far as any member of President Laura Chinchilla’s government has gone in opposing the proposed tax package.

Also Monday the special committee approved a motion to exempt some 264 products from the proposed 14 percent value-added tax. Most are food products in the so-called basic basket. The motion increases by 36 the number of products that would be exempted. Among these is baby formula.
The committee also exempted ferry service from the tax. Other forms of transportation, such as taxi fares, already are exempted.

The committee also exempted wheelchairs, certain other medical equipment, protheses, equipment for programs of rehabilitation and vehicles for persons with physical limitations.

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