Lawmakers urge president to act on financial crisis

Lawmakers, even a member of the president’s own party, are expressing concern now that Moody’s rating service has changed the country’s debt outlook from stable to negative.

Frank Corella Vargas, a lawmaker with the Partido Acción Ciudadana, called upon the president to withdraw all legislative proposals that are not involved with improving tax collection, fighting tax fraud and cutting costs.

Karla Prendas Matarrita of the Partido Liberación Nacional was more blunt. She said in a speech at the Asamblea Nacional that the government is incapable of solving the financial crisis and this puts at risk the nation’s economy.

The change in the rating, she said, is a severe warning that means more expenses for the country. And she blamed the poor management by the government.

Both lawmakers called for a broader discussion of the problem.  Corella made his comments in a letter to the president.

He said that the president was quoted saying that the financial situation of the country would provoke an undesirable condition which would result in a sea of misery, social unrest, institutional retreat and political chaos. The lawmaker said that such a prediction deserves drastic action.

The president, Luis Guillermo Solís, has staked the financial health of the country on a package of tax bills that now are in the legislature. However, there is strong opposition to them.

Solís seeks a value-added tax that quickly 

Karla Prendas Matarrita  makes a point.

Karla Prendas Matarrita makes a point.

would rise to 15 percent. He also seeks higher income tax rates and a strengthening of measures against tax fraud. The Ministerio de Hacienda also seems to confuse tax fraud, which is illegal, with tax avoidance, which is legal. Avoidance means structuring business or personal affairs so that the tax bite is as little as possible.
Some who have studied the president’s tax package have said that the measures would fall far short of putting the country in the black.

Half the budget is borrowed money and, as  Corella pointed out in his letter, the national deficit is 5.7 percent of the gross domestic product, soon to reach 6 percent.

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