New budget plan shows there was still plenty to cut

Although the government of President Laura Chinchilla Miranda contended for months that the only solution to the country’s financial crisis was a value-added tax, subsequent developments show that this was not the case.

When the Sala IV constitutional court ruled that the legislative procedure used in obtaining initial passage of the tax package was faulty, the president had to adopt other methods. The result was belt-tightening that is expected to produce $200 billion colons or about $400 million. That’s $100 million short of the optimistic predictions of income from the original tax plan.

The president is relying on a proposed law for the efficient management of public finances to produce 60 billion colons or about $120 million. Some 30 billion colons more (about $60 million) is expected because what Casa Presidencial calls luxury foods like kiwi fruit and T-bone steak will be subject to sales tax for the first time.

In addition, the central government is preparing to sell excess property, including real estate, estimated at 2.5 billion colons or about $5 million. A.M. Costa Rica in an editorial called for the sale of excess government property as long ago as Nov. 7

The government also plans to make a bookkeeping change in what entity pays the salaries of workers in the Registro Nacional and the Imprenta Nacional, the national printing facility, for a savings of 7.9 billion colons or about $15.8 million.

By transferring surpluses in other institutions, the government expects to get 5 billion colons or about $10 million.

Perhaps most telling of all is what the government expects to save by freezing the salaries of employees making 3 million colons or more a month. That is about $6,000. Casa Presidencial said that the Ministerio de Hacienda estimates that there are 430 persons in the central government affected by that decision, which was mandated in a presidential decree. That means they will not get raises this year or next. The ministry also said that there were 3,450 persons earning that much or more each month in
autonomous institutions. These include agencies like the Instituto Nacional de Seguros, the water company, the Refinadora Costarricense de Petróleo S.A. and the telecommunications giant, the Instituto Costarricense de Electricidad.

Just by freezing these higher salaries, the government estimates it will save 9 billion colons or about $4.5 million. Of course, that does not include the salaries of those in the judiciary, the legislature or the employ of the Tribunal Supremo de Elecciones, which are independent of the central government.

The government also plans to charge for what it calls non-essential public services, including the rental of the Antigua Aduana and other state-owned cultural facilities like museums. Also planned are increases in licenses for foreign and Costa Rican tour and sports fishing boats, charges for certain medical and pharmaceutical exports that require lab testing and payments from entities that are supervised by some government facilities.

The political battle over the president’s tax plan was illuminating in that it shows that many autonomous institutions have large surpluses. It also showed that money was being spent for reasons not well known to the public. For example, Ms. Chinchilla ruffled feathers when she rejected a raise for lawmakers and said that new cars for Corte Supreme magistrates would not be purchased this year.

There still are some projects that have evaded being cut. The Instituto Nacional de Seguros still plans to build a $7 million facility for the Museo de Jade near two other similar facilities, the Museos del Banco Central at Plaza de la Cultura and the Museo Nacional east of Plaza de la Democracia. A report issued by the national insurance company said that the museum in the current location on Avenida 7 in the corner of its headquarters brought in just $160,000 in admissions last year. Ms. Chinchilla was present recently to give her blessing to the project.

The estimates put forth by the Ministerio de Hacienda are just that. The results also depend on favorable legislative action consistent with the intent of the executive branch. That is not guaranteed. The government has a tradition of overestimating the income from new taxes and fees as well as other financial manipulations.

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