Pacheco May Water Down Costa Rican Tax Package

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

08 August 2005

It has emerged that President Abel Pacheco is prepared to water down one of the more contentious aspects of the long-delayed fiscal reform package in order move the legislation through Costa Rica's legislature.

Under the tax plan, Costa Rica's taxpayers will be required to pay tax on income earned worldwide, whereas under the current territorial system only income earned within the country's borders is taxed.

However, according to a report in A.M. Costa Rica, Pacheco met with legislative leaders last Thursday when it was decided that foreign income would only be taxed if it was remitted back to Costa Rica.

First proposed in 2002, the fiscal reform package intends to raise some $500 million in additional 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. However, it has remained bogged down in the legislative assembly ever since despite attempts by government supporters to force through the reforms.

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