Costa Rica’s Fiscal Reform Plan Resurrected From The Dead

by Leroy Baker, Tax-News.com, New York

10 September 2004

After Costa Rica’s long awaited and much troubled tax reform bill was declared dead by certain lawmakers last month, the proposals may yet be approved by the end of the year after receiving the kiss of life from the country’s Constitutional Court.

In July, the passage of the Fiscal Reform Package was halted after the Constitutional Chamber of the Supreme Court, Sala IV, accepted an action by two deputies who accused the former president of the Legislative Assembly, Mario Redondo, of violating the Constitution by acting with secrecy and without the required approval of two-thirds of lawmakers in an attempt to accelerate the debate on the tax plan last March.

However, according to a report in the Tico Times, Sala IV has rejected all of the actions brought by the deputies, clearing the way for the proposals to be put before a Legislative Assembly vote.

It is an amazing turnaround of events, especially after the Patriotic Bloc legislative deputy Humberto Arce, a member of several of the commissions that have studied and modified the plan, last month declared that “the fiscal plan is dead.”

“The situation for the fiscal reform looks promising,” Redondo, congressman for the ruling Social Christian Unity, told the Times, adding that the proposals may be voted on during the first half of October and approved by the end of November.

The former Finance Minister Alberto Dent, a supporter of measures who recently resigned, was quoted as observing: “We took a plan that was completely stalled, completely dead, and have practically steered it to its final phase.”

“The fiscal reform will bring the country years of stability,” he continued.

“I believe it's worthwhile because it not only allows for fair taxation by ensuring those who have the most pay the most, it also stabilizes the country by practically eliminating the (fiscal) deficit,” argued Dent.

The Permanent Fiscal Reform Plan was first conceived two years ago to bolster the government’s tax revenues, pay off the country’s growing foreign debt, and reduce the deficit to 2.65% of GDP through a series of tax hikes and improved collection methods.

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