Tax agency outlines a new three-part campaign to stem evasion

Authorities say they want to combat Costa Rica’s tax evasion problem by collecting from those who donate money or provide services to political parties.

The finance ministry and the Dirección General de Tributación issued the plan Wednesday. It included two additional parts to regulate taxes from business professionals who declare expenses above 60 percent of their income and a campaign against companies and citizens wrongly declaring zero taxes. The agency is cross referencing various data bases.

There were tax irregularities found in more than 75 percent of donors surveyed from election campaigns before 2014, according to a Ministerio de Hacienda report. The majority of those campaign backers are not registered with Tributación and remained hidden from their tax rules.

Others were found guilty of outright omissions or inaccurate tax reporting, the report said.

Vice Minister Fernando Rodríguez said the finance ministry, working with the Tribunal Supremo de Elecciones, will start to tightly monitor the influx of political party funds by reviewing donor reports.

He added that the agency does not yet have reports from the recent presidential election.

As far as securing its control over professionals, Tributación now requires that they declare all expenses and deductions that equal more than 60 percent of their income. Tributación investigators found that some professionals have been registering up to eight related companies with the same pattern of excessive spending just to buy expensive personal items that they could hide from tax collectors. For example, they found that people have been buying cars worth more than $50,000 and including them in these company expense reports to dodge taxes.

“We will ask professionals to detail all these elements with their respective receipts for each piece of data marked,” said Carlos Vargas, director of Tributación. “Whatever can’t be proved will be rejected and will lead to a trade modification and its corresponding tax. This is considered very serious and is an act punishable with 100 percent of Tributación’s power,” he said.

The plan’s third installation, which says that taxpayers cannot declare zero taxes, is already subject to a trial run in the Pacific regions of Puntarenas and Guanacaste. Vargas said that so far investigators have discovered that depreciation expenses exceed more than 50 percent of the worth of asset values, despite fixed percentages in the country’s income tax law that basically only range between 5 and 15 percent.

“Here as in the rest of the country we have cases of taxpayers reporting expenses greater than their incomes, although their displays of wealth say the contrary,” he said.

Neither companies or individual taxpayers are allowed to declare zero taxes based on the argument that their income was equal to or greater than their expenses, the finance ministry report states. Authorities said they hope to have this aspect of the plan in effect by the year’s end.

Rodríguez said the finance ministry is now taking a variety of steps to plug these leaks in the country’s tax collection. He said the agency has improved computer processing and has developed a social media mechanism that calls upon the public to out tax evaders. This three-part plan presented Wednesday should allow for greater ability to prevent and detect evasion, he said.

“We are making efforts in all areas of income to improve compliance,” he said. “We have proposed to close legal spaces, and we’ll send our first proposal of the law against fraud to congress.”

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