The proposed 14 percent value-added tax is simply confiscatory

When President Laura Chinchilla says her fiscal plan will tax those who have for the benefit of those who do not, she appears to be a bit disingenuous.

The president’s tax plan takes from the rich for the same reason Willy Sutton gave for robbing banks: “That’s where the money is.”

The legislature Wednesday night passed on first reading a disastrous tax plan that creates a 14 percent value-added tax and extends the levy to many parts of the economy that have not been taxed in the past.

Somehow Ms. Chinchilla and her aides equate high taxes with development. Somehow, if the central government takes enough money and lavishes it on itself, the country will miraculously move from Third World to First World status, according to this theory.

The extensive tax plan is in the Sala IV constitutional court for a review. In our opinion, taking 14 percent of a transaction is confiscatory. To say the Sala IV lacks consistency would be an understatement. And in this case, we predict a big thumbs up from the magistrates. Remember, the nation’s budget was so tight this year that they all did not get new government cars.

Anyone who can run an enterprise with a consistent 14 percent net profit is truly a business genius. There are very few firms that generate that kind of profit. But the government is
prepared to take its 14 percent under threat of force, as all governments do.

But not to worry. Ms. Chinchilla and her aides are confident that low-income earners and the poor will be protected from the impacts of the tax plan. Presumably they were at lunch when Economics 101 was offered. The corporations pass on the taxes to human beings. Everybody will pay the tax. Corporations collect the money.

There are so many negative aspects of this plan that to address each one would take thousands of words. Among these is the bait-and-switch tactic to exact taxes from companies that have come here to enjoy the free zones to make items for export.

Then what should Ms. Chinchilla do? For starters there are 800,000 ounces of gold at the Crucita mine site. Heaven help us if we cut down a few trees to extract it. And the northern zone might have rich petroleum deposits. At least that is what a Colorado firm wants to find out. With gasoline more than $5 a gallon, one would think that the country’s CEO would leap at the chance for homegrown energy.

Instead, demagoguery disguised as environmental concern controls the field.

There is something wrong with a plan that taxes indiscriminately when there are so many other clear options.

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