Doubling sin tax urged to iron out inconsistencies

The detention of former lawmaker Justo Orozco focused public attention on the motel trade in Costa Rica. Orozco is accused of trying to trap a woman in one of the motel facilities and committing sexual abuse.

At the same time, lawmakers are considering doubling the tax on motels and similar. A study related to the bill, 18.718, points out that there are 1,604 motel rooms in Costa Rica, and the operators pay a 53 percent tax tax. Such room primarily are designed for sexual encounters.

The principal tax, 30 percent, is in favor of the Instituto Mixo de Ayuda Social. The money is supposed to be used for the poor.

There also is a 13 percent sales tax and  a 10 percent tax in favor of an organization called Asociación de Desarrollo Laboral Femenino Integral.

The proposed law would double the 30 percent tax to 60 percent.  The Instituto Mixo de Ayuda told lawmakers that this would bring in  700 million a year. That would be about $1.33 million and 200 percent more than the agency gets now from the tax.

The tax again would apply to hotels that are not certified by the Instituto Costarricense de Turismo, massage parlors and night clubs that rent rooms. There are an estimated 133 businesses that would be covered by the tax.

A new wrinkle in the proposed law is that the  Instituto Mixo de Ayuda Social would have the power to close down establishments in arrears with the tax.

A summary of the bill noted that nearly two dozen businesses are already in court over back taxes to the institute.

The summary also noted that a few motels have changed their name to avoid the negative public opinion. They now call themselves hotels de pasos. They still pay the tax, the summary said.

The amounts collected by the  Instituto Mixo de Ayuda Social since 2002 have been inconsistent. It has ranged from a low of 33 million colons in 2006, about $89,400 then, to 447 million colons in 2003, about $1.3 million at the rate of exchange then.

At the very least, this irregularity in payments suggests collection problems by the government, diminishing returns and evasion.

The situation might be instructive to officials as they try to raise taxes in general.

Right now the motel tax bill is in committee, and the Instituto Mixo de Ayuda Social is pushing strongly for its passage.

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