Ms.Chinchilla announces a stopgap budget measure

Casa Presidencial video Ms. Chinchilla adresses the nation

President Laura Chinchilla Miranda went on television Wednesday night to announce new measures by the central government to reduce expenses and increase income.

The president said that an electronic system for reporting sales tax would be implemented to reduce evasion. She also reduced the number of produces that are exempt from sales tax, concentrating on what she said were luxury items. Those food items that now will be subject to the tax include T-bone steaks and kiwi fruit.

The president also said that the central government would sell off some of its real estate.

The president said that she would freeze the salaries and high pensions and also the per diem fees paid to boards of directors. Also taking a hit will be the political parties that receive funds from the central government. She said she would reduce these payments.

Government agencies would be authorized to collect for non-essential services, the president said. She also wants to move surpluses from the autonomous agencies to the central government.

The president was not very specific, but Casa Presidencial immediately announced a session for today where officials will explain the measures to reporters.

Those who will do so were identified as Vice President Luis Liberman, Carlos Ricardo Benavides, minister of the Presidencia, Franciso Chacón, minister of Communications and the staff of the Ministerio de Hacienda.

The stopgap measures will only raise about half of what the president says she needs to run the country. She estimated it at 0.8 percent of the value of the country’s gross domestic product. The new measures were forced on the president when the Sala IV constitutional court ruled that the legislative process used to bring her $500 million tax plan to a vote was not constitutional. That plan was estimated to raise about 1.5 percent of the gross domestic product for the central government.

Ms. Chinchilla met since Friday multiple times with advisors to come up with the proposals.

The president spoke on what is called the cadena nacional or national network for an unusually long time. Her talk was seven minutes and 21 seconds. She began by telling Costa Ricans that the interest rate they pay in their daily life was high because of the debt of the central government. And she noted that 45 percent of the national budget is from borrowed money.

She outlined steps she took to save money, including freezing the government payroll and freezing the salaries of ministers, vice ministers and even that of herself. She said these efforts saved 100 billion colons (about $200 million).

She made no mention of her closest advisers who were caught failing to pay their own taxes and accepting generous contracts from the state. Some are under investigation. She did mention that the country achieved its first criminal conviction for tax evasion this month. That was a case started in 2005.

Ms. Chinchilla said that to cut the budget to meet the income would require firing 24,000 employees or failing to pay 60 percent of the interest on the public debt. She said it would mean not paying 55 percent of the pensions.

She said such actions were not feasible and would jeopardize the high level of social security and highway infrastructure.

She also said a lot of her new plans required action by the legislature. She said action there was critical on some proposals the central government has submitted, including one for issuing debt instruments.

The president admitted that the measures she is taking will not resolve the country’s financial problems. She said what was needed is a more progressive tax structure.

Although the president did not give details, Casa Presidencial released a decree she signed that changed the content of the so-called basic consumer basket. Also released was a proposed law to efficiently manage public finances. It includes some of the actions the president promoted, including cutting the money paid to political parties for the 2014 elections.

Some proposals seem to face an uncertain future in the legislature.

The method of electronic registering of sales and sales tax now exists, but not every company uses it. The system allows workers from Tributación, the tax agency, to peek into company computers via the Internet.

The decree gives a long list of items exempt from sales tax and said that the idea was to protect individuals with low incomes. What will be taxed now includes better cuts of meat, salmon, rice for paella, risotto, shrimp, lobster, peaches, plums, cherries and bottled water.

There are 228 items exempt from sales tax, and they seem to be the same items that were listed in the president’s tax plan. Her advisers created the list to please some lawmakers who said the poor need more breaks. Also listed as tax-free are school uniforms, school shows, texts and notebooks, newspapers and periodicals. Many of the items already are free of sales tax.

Casa Presidencial contends that the president has the power to apply sales tax and exempt some items. That may lead to a legal challenge.

This entry was posted in Costa Rica News. Bookmark the permalink.