San José, Costa Rica, since 1956

Court Case May Delay Tax Plan

THE future of the widely discussed and much-delayedtax plan is now in the hands of the seven justices of theConstitutional Chamber of the Supreme Court (Sala IV).Legislators cannot vote on the tax package until theSala IV issues a ruling on whether some actions taken duringthe legislative process are constitutional.Meanwhile, top government officials and internationalorganizations, including the International Monetary Fund(IMF), this week reiterated the urgent need to approve thetax reforms to reduce the country’s spiraling fiscal deficitand ensure future economic stability.THE Sala IV last week accepted an unconstitutionalityaction submitted in June by legislative deputies JoséMiguel Corrales of National Liberation Party and GerardoVargas of Citizen Action Party.This is the first time in the country’s history that an unconstitutionalityaction has been filed against a bill that is stillbeing discussed by the Legislative Assembly, according toCorrales – although it is by no means the first time the two-year-old Permanent Fiscal Reform Package has faced hurdles.In the unconstitutionality action, Corrales and Vargasallege then-president of the Legislative Assembly MarioRedondo, of the ruling Social Christian Unity Party, violatedthe Constitution by acting with secrecy and without therequired approval of two-thirds of lawmakers last Marchwhen he interpreted an internal regulation with the intentionof speeding up discussion of the tax plan.IF the Sala IV upholds the claims made by Corrales and Vargas, all changes to the tax planmade since March would be annulled.Losing the results of the past four monthsof work could result in the plan’s demise,according to some experts.Corrales and Federico Vargas, head ofSocial Christian Unity’s legislative faction,both said they hope the Sala IV willresolve the matter quickly.“WE expect the Sala, taking intoaccount that this is an issue of nationalimportance and considering the problemsit’s causing for the administration andpublic services, will rule on it soon,”Federico Vargas explained. “We can’t tellit how to rule because it has autonomy.But it must issue a ruling before it’s toolate.”Corrales agreed on the need for aquick ruling, adding that the purpose ofthe action is to ensure the country’s lawsare respected, not to “hurt anyone” orobstruct the project. However, he notedthe Sala IV has, in some cases, taken upto five years to resolve unconstitutionalityactions.Although the Sala IV has no timelimit to evaluate matters of unconstitutionality,Judicial Branch spokeswomanSandra Castro said she expects the matterto be given top priority because of itsimportance.Before the high court justices issue aruling, they must hold hearings duringwhich the Government Attorney’s Officeand Redondo will be asked to testify.Third parties interested in the matter willbe given a chance to argue for or againstthe action.FEDERICO Vargas defended Redondo’sactions, which he called “necessary”and the only way to overcome the“obstructionist tactics” of deputyFederico Malavassi and other legislatorsof the Libertarian Movement Party aimedat derailing the plan.Since January, the government anddeputies from the three major parties haverepeatedly clashed with the Libertarians,accusing them of purposely obstructing thetax plan. The Libertarians on several occasionshave made clear they adamantlyoppose the project (TT, Feb. 20).In recent weeks, the Libertarians haverun ads on national television warningviewers of the dangers of the tax plan.The ads are meant to counteract governmentpropaganda that stresses the plan’simportance.Although the government has openlychallenged the Libertarians to reveal whohas been paying for the ads, they have notpublicly revealed their source of financing.FEDERICO Vargas said lawmakerswould continue to work on the tax planwhile Sala IV rules on the matter.“The bill’s procedure is not being suspended.The only thing being suspendedis the final act – voting on the project,” heexplained. “In the meantime, the commissionwill continue to process reformmotions. This project is of great importancefor the country and will continueforward.”On Tuesday, President Abel Pachecoonce more warned of the dire consequencesthe country would face if the taxplan is delayed yet again.“We are living in a state of crisis,”Pacheco said during his weekly Cabinetmeeting. “An increase in [public-sector]salaries, which workers deserve, is coming.The discussion of a new budget forpublic universities is also coming.“…Some people have asked us to savemore money, but we’ve saved and tightenedour belts all we can,” he explained.“If we want to continue to live like we doin Costa Rica, we need the wealthy tocontribute more.”Pacheco said most Costa Ricans,including the rich, understand the needfor a permanent fiscal reform, and heaccused a small rich elite of conspiringwith the Libertarians to stop the reforms(TT Daily, June 18).The President also stressed the planwould benefit the poor, who would payno taxes.FIRST proposed 27 months ago by acommission of former finance ministers, thePermanent Fiscal Reform Package aims toincrease government revenues and permanentlyreduce the fiscal deficit by creatingnew taxes and improving collection of existingtaxes (TT, Dec. 5, 2003).Since then, the plan has been studiedand reformed by several legislative commissions,which have consistently failed tomeet deadlines to put the plan to vote.In February, Finance MinisterAlberto Dent announced he would cut¢72 million ($171.4 million) from thebudgets of 15 ministries and severalsocial programs if legislators did notapprove the plan by the end April.Lawmakers failed to meet the deadline,which was extended until the end ofMay. The deadline was later extendedindefinitely (TT, April 16).THE tax plan is in its final phases. It hasmade it out of the legislative commissionand has been transferred to the floor of theLegislative Assembly (TT, June 11).Deputies are now debating the final reformmotions before putting it to vote.Last month, Dent said he expected theplan to be voted on by the end of July.On Tuesday, Federico Vargas said heis optimistic it would be put to votebefore the end of August.

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