Minister says tourism will be exempt from new tax

The central government plans to exempt tourism from the value-added tax proposed in the current tax reform package.

That was the word from Fernando Herrero, the minister of Hacienda, in testimony before a special legislative committee studying the proposals. The minister did not give details, but his ministry said that the changes to the pending law would be presented officially this week.

The minister was talking in the context of exempting public educational institutions from the tax. He just mentioned without further explanation that current incentives for tourism would not be taxed.

The tax proposal, corrected as of Oct. 28, says nothing about exempting tourism or how this would be accomplished. Tourists now pay a special $15 head tax when they enter the country.

That levy replaced a special tourism sales tax collected at hotels and some restaurants.

The central government also has gone to the people with a Web page promoting its tax package. Among other points, the text says that the government has only 9 percent of the national budget that is not debt service, salaries or transfers to other institutions.

Fully 40 percent of the national budget is salaries and pensions, it said. Although President Laura Chinchilla Miranda has issued a decree freezing central government hiring, she has not made any significant cuts in personnel, services or institutions. Casa Presidencial still is seeking the approval of a new sports ministry by the legislature. The national budget increased 13 percent this year, and the budget for next year is expected to increase 10 percent, said the ministry.

The Web page contains a number of arguments and points out that a 3 percent tax on property transfers would not be levied on homes worth 50 million colons or less. That is about $98,000 today.

The Web page also makes clear that financial transactions will not be taxed but the commissions charged by the banking organizations will be. If a bank collects a commission of $1 on an automatic teller transaction, the tax will be about 70 colons, the ministry said. Also not taxed would be the purchase and sale of foreign currencies, it added.

According to the proposal, those earning 685,000 colons a month will pay no income taxes. That is about $1,342. Rates for those who make more range up to 20 percent at 4 million colons a month.
Money sent outside the country for professional services by foreigners will be assessed a 20 percent tax, said the ministry.

The Web page downplays the administration’s 14 percent value-added tax. The rate is just 1 percent higher than the current 13 percent sales tax, said the text. However, the value-added tax is far broader and will generally bring much more income for the government, if passed. For example, there is a 2 percent proposed tax on private educational tuition which does not now exist.

The new Web page is

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