President Luis Guillermo Solís is coming under fire for failing to present a frugal national budget for 2015, and the criticism extends to his decision to seek a value-added tax later this year.
Lawmakers Monday unanimously voted to ask for a briefing by Helio Fallas, the first vice president and minister of Hacienda, the budget ministry.
Meanwhile, such powerful lawmakers as Antonio Álvarez Desanti, head of the Partido Liberación Nacional delegation in the Asamblea Legislative, were skeptical of new taxes. Álvarez told fellow lawmakers that he and his party will not approve any fiscal reform or create any new tax until they learn what the government plans for public expenditure.
Solís has been criticized roundly for submitting a budget that is 19 percent higher in expenditures than the previous year.
Even La Nación, a newspaper that generally supports the government, produced a scathing editorial Monday directed at Fallas and Solís. The newspaper questioned why universities got a 14 percent increase in their budgets and why there were big raises for public employees who already earn two or three times more than their private sector counterparts.
The newspaper even accused the president of patear la bola para adelante. The Spanish phrase, which means “kick the ball down the road,” has been used repeatedly to describe government budgets for the last six years. Presidents can only serve four-year terms.
Both Solís and Fallas have said that the current administration has inherited many financial problems from the previous ones. The government has taken some steps to cut
spending. For example, the administration is seeking to put a reasonable cap on pensions. Various news media have shown that former legislative deputies and former ministers receive pensions that sometimes are as much as $12,000 a month.
Fallas has been before the Comisión Permanente de Asuntos Hacendarios twice to explain the status of the nation’s finances. No date was set for his next visit to the legislature.
The ministry headed by Fallas reported Monday that the budget deficit was reduced in August due to better tax collection and cuts in spending. Still the reported annual deficit accumulated through August is 956.8 trillion colons. That is about $1.7 billion.
Solís also has come under fire for going back on an election pledge to avoid new taxes for the first two years of his administration. However, even when he said that repeatedly many were skeptical considering the financial state of the country.
Solís may have been motivated to announce a value-added tax on television Sunday night because international rating agencies have downgraded the country’s debt. He was in New York Monday trying to attract investors to Costa Rica. He is expected to argue that instituting the 13 percent value-added tax to replace the exiting 13 percent sales tax is not really a new levy. He did say that the value-added tax will generate 300 billion colons more in taxes.
That is about $550 million.
His plan for a global tax, another proposal offered Sunday in his television speech, would be presented to lawmakers in 2015, he said.
Passing such measures will require lengthy deliberations in the legislature, and even the president’s own party, Partido Acción Ciudadana, may not support him.