Solís needs new taxes to keep campaign promise

Business operators in Costa Rica had better brace for more taxes and a renewed participation of the state in public life.

That seems to be the philosophy of Luis Guillermo Solís, the remaining active candidate for the April 6 presidential elections. In addition, the legislature seems to have many new members who would support new taxes. They come not only from Acción Ciudadana, the party of Solís, but also Frente Amplio, which was the third highest vote getter in the Feb. 2 elections.

Before the election, the Solís campaign presented an extensive platform. There seemed to be promises for everyone. He supports going slow on new trade treaties and even broad increases in the minimum wages.

He said in one interview that Finland was his ideal country, except for that country’s exportation of natural resources.

Finland’s national income taxes range up to 32 percent on earned income, but there is a 24 percent value added tax and a stiff municipal tax of up to 22 percent. In addition there is a wealth tax, an inheritance tax, a gift tax, and an asset transfer tax as well as a church tax, according to the Web site

The Solís campaign also promised to fight corruption and listed 10 goals, including improving the transportation infrastructure and strengthening the Caja Costarricense de Seguros Social.

Some business people became uneasy because neither the candidate nor his campaign said from where the money was coming to do all this.

In fact, this may be the biggest danger for the candidate, raised public expectations. That was the initial reason that the public became disenchanted with President Laura Chinchilla when it became clear she did not have a solid plan to fight crime, which was a key element in her platform.

Partido Acción Ciudadana has many members who have opposed the free trade treaty with the United States and other such treaties. But Solís is unlikely to support a renegotiation of the document unless other Central American states participate. However, he appears to believe the treaty is unfair to Costa Rica. He opposed it when it was being negotiated. He recently said he would not participate in the Alianza Bolivariana para los Pueblos de Nuestra América, the so-called ALBA, that was created by former Venezuelan president Hugo Chávez.

The campaign emphasized a government and country of social justice. That phrase is a buzz word for more state involvement. The party pledges to protect food sovereignty, which is a form of protectionism. The Chinchilla administration was trying to free the state-controlled price of rice and make the product conform to free market forces. The subsidized rice farmers do not want this.

As some commentators have noted, this form of protectionism is good for big business because it keeps consumer prices higher.

One factor that keeps business people concerned is the gaping fiscal deficit. Half the current national budget is borrowed money.

Solís has proposed reforming the public workforce but the changes only would affect new hires. he said in campaign statements.

The campaign also promises to guarantee an academic and technical education of quality, but it really does not say how.

Everywhere, of course, politicians begin forgetting campaign promises the day they are elected. And there is no way that Solís can fulfill all the promises cheaply. For example, another is to put into practice an environmental management compatible with human development, whatever that means.

Solís would dispute his characterization as a leftist. He was an adviser to Óscar Arias Sánchez, and he was general secretary of the Partido Liberación Nacional. Like many Costa Rica politicians, there is no record of  Solís, 55, having held a job in private industry or in running his own company. He also is a university professor in economics and has attended classes and worked at three U.S. institutions.

He left Liberación Nacional in 2009 over internal corruption issues, he said.

More of what can be expected will become obvious as Solís appoints ministers and advisers. Those in the tourism industry are watching closely the appointment to head the Instituto Costarricense de Turismo. There also is hope that a new minister of public works can clean house there.

Solís faces challenges beside the growing national deficit. There is the territorial dispute with Nicaragua over the mouth of the Río San Juan. There is the arbitration case with Infinito Gold S.A. over the shutdown of the Las Crucitas open pit mine. There is the soaring value of the dollar in relation to the Costa Rica colon, which affects repaying of foreign loans.  The list goes on.

The nation’s tax department has had a number of plans drawn up for proposed new laws. The agency simply was waiting to find out who would be the next president to begin work with the candidate’s transition staff. Officials hope to have documents to present to lawmakers early in their term, which begins May 1.

That is a week before the new president takes office.

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