New taxes considered unlikely to pass

There seems to be agreement among observers of the political scene that the central government’s plan for new taxes is dead.

The Standard & Poor’s Ratings Services said as much when it announced last week that it is cutting the nations credit worthiness from BB to BB-.

“As the administration of President Luis Guillermo Solís approaches its last full year in office in 2017, we think it is increasingly unlikely that it will be able to pass a substantial fiscal reform,” said Standard & Poor’s. “The country’s fragmented congress and protracted process for agreeing upon legislation have blocked the passage of comprehensive fiscal reform (including changes to income taxes and a shift to value-added taxes) for many years.”

Central American Data, an online financial news service, said Monday in an editorial that “Costa Rica’s external vulnerability is now much higher than it was in years past, as the growing fiscal deficit makes it increasingly difficult to access external financing, without which pressure on domestic interest rates will be inevitable, with a consequent negative effect on the real economy.”

The news source cited several other Costa Rican news articles making the same point.

Meanwhile in the legislature, Rony Monge Salas of the opposition Partido Liberación Nacional said Monday that 45 members of the team assembled by President Solís have left the administration. He was commenting after the resignation of  Mauricio Salom Echeverría, who headed the Consejo Nacional de Vialidad, the road agency.

He blamed the resignations on lack of leadership and a clear statement of objectives and goals.

Some lawmakers appear reluctant to create new sources of revenue for the government until there is a display of reducing expenditures. To address that concern the Ministerio de Hacienda, the finance ministry, unveiled a draft last week of  measure that would require lawmakers to state from where funds are to come before they approve new spending. However, as the ministry pointed out, that requirement already is in the Costa Rica Constitution.

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