“The Truth About Costa Rica’s Tax Package and its Impact on Small Businesses”

The government only needed to recognize an obvious fact at first sight: the fiscal package increases the tax burden. The admission came through the statements of the Vice Minister of Finance, Priscilla Zamora, on the television program “National State.” Until now, the Executive insisted on denying it, arguing that the package does not contain new taxes, but the modification of percentages and exemptions of the already existing ones.

Thus, the increase in income tax for small and medium-sized companies is not new, but rather a five-fold increase in the current rate for those with lower incomes. The value added tax has always existed, and if wheelchairs would pay the full rate of 13%, it is because the exemption was removed.

The fallacy is hardly ingenious because it crashes against the reality of the Small business forced to pay five times as much, no matter how much the same tax is. Between 5 and 30% there is a sufficient qualitative difference to recognize in the reform the creation of a totally different tax.

On the other hand, the Treasury argues that the total return on the package is close to zero if the increases are offset by the reductions granted in other cases, mainly the income tax for self-employed workers, but the projects lack A well-founded estimate of its tax impact and the improvement for self-employed workers is little consolation for small and medium-sized companies than paying 5% —in the best of cases— and 20%, at the higher end of the scale. current, he goes on to pay 30%.

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The vice minister also recognized that it is not urgent to approve the projects, except for the income tax reform, and defended the exception with a disturbing argument, especially for the Legislative Assembly, where the tax package found fierce opposition From the first moment. Said Zamora, this reform includes the proposal of the Executive Branch to get out of the gray list where the European Union lists non-cooperative jurisdictions in tax matters.

If Congress does not rush to demand the independent processing of the reforms required to adjust to the parameters of the European Union, it will not take long to be designated as responsible for the country’s permanence in the gray list. The link between the two issues can constitute a pressure in favor of the new taxes.

There is no reason to create a dependency relationship between the two reforms. The government’s tax package goes far beyond what is required by the European Union. The deputies know this well and there are initiatives, such as the Social Christian Unity Party, to resolve the difference without the need for other measures.

Europeans criticize the non-existence of a tax on earnings obtained abroad by passive investments, that is, income generated without the active participation of the investor, as in the case of securities. Consequently, these incomes do not pay taxes anywhere, which makes us a tax haven.

Another disagreement is the definition of the taxpayer in our legislation. According to subparagraph b of article 2 of the Law on Income Tax, “a permanent establishment is understood to be any site or fixed place of business in which the essential activity of the non-resident person is fully or partially carried out.” Europeans object to the word ‘essential’, for obvious reasons. That is what we must change to preserve national prestige and maintain good trade relations with Europe. It is not necessary to create a new tax on SMEs or approve other provisions of the tax package.

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2023-05-31 16:12:29
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