San José, Costa Rica, since 1956

Debate Continues over Stalled Tax Plan

THE government’s top legal expertsthis week sided with legislators who havequestioned the way in which congressionalleaders attempted to speed up passage ofthe much-delayed tax plan upon which thegovernment has conditioned many of thecountry’s most urgent projects.Undeterred, President Abel Pacheco onTuesday once more said he will conditionfunding for rural roads, the hiring of additionalguards at the country’s nationalparks (see separate story) and the submissionof the Central American Free-TradeAgreement (CAFTA) with the UnitedStates to the Legislative Assembly (TT,July 16) on the approval of the tax reforms.Pacheco also downplayed the importanceof the Government Attorney’s Officeannouncement.“IT’S somewhat disconcerting, but itdoesn’t worry us much,” said Pacheco duringhis weekly cabinet meeting. “The recommendationsmade by the GovernmentAttorney’s Office are not binding. What worriesus is the final decision by the justices ofthe Constitutional Chamber of the SupremeCourt (Sala IV). However, I don’t think thiswill weigh heavily on the Sala’s decision.”Pacheco said the report has limitedimportance because Adjunct GovernmentAttorney Farid Beirute, the highest-rankingofficial in the Government Attorney’sOffice, did not sign it. Beirute, who was onvacation when the report was prepared, hassaid he stands behind the report.Last month, Sala IV accepted anunconstitutionality action filed by legislativedeputies José Miguel Corrales ofNational Liberation Party and GerardoVargas of Citizen Action Party.The action alleged then-president ofthe Legislative Assembly Mario Redondo,of the ruling Social Christian Unity Party,violated the Constitution last March whenhe interpreted an internal regulation withthe intention of speeding up the tax plan’sdiscussion (TT, July 9).Until the Sala IV issues a definite rulingon the unconstitutionality action, thetax plan cannot be put to vote. Althoughthe Sala IV has no time limit to evaluatematters of unconstitutionality, it is expectedto give it top priority because of itsimportance.In the first step of the toward making adecision, the Sala IV asked theGovernment Attorney’s Office to conducta legal study on the matter with recommendationson how the court should rule.In its report, the attorney’s office recommendedthe Sala IV declare Redondo’sactions unconstitutional.Although the seven justices of the SalaIV are not required to follow the governmentattorney’s pronouncement, the reportcould influence their decision.If the Sala IV upholds the claims madeby Corrales and Vargas, all changes to thetax plan made since March would beannulled, further delaying the tax plan,which is already two years behind schedule.REDONDO this week also downplayedthe importance of the report.“Where there are three lawyers, thereare always five legal opinions,” Redondotold The Tico Times. “The report isrespectable, but the GovernmentAttorney’s opinion is one of many that theSala IV has to look at.”REDONDO said he and a group ofdeputies from several parties would arguetheir side before the Sala IV today.Redondo defended his actions, callingthem necessary and the only way toovercome the “filibustering and parliamentaryterrorist tactics” used bydeputies of the Libertarian MovementParty to delay the tax plan, which theyadamantly oppose.Redondo said Costa Rica’s solidaritybaseddevelopment model is at stake in thiscase. The future of Costa Rica’s publiceducation and health-care services dependson the rapid approval of the tax plan, hewarned.Expressing confidence the unconstitutionalityaction will be struck down,Redondo said he had other “possibilities”that would make it possible to move theplan forward in case the Sala IV annuls allthe changes made to the tax plan sinceMarch.Libertarian deputy FedericoMalavassi alleged the GovernmentAttorney’s report dealt only with the firstin a long series of mistakes made byRedondo to impose the tax plan on thecountry.As soon as the Sala IV issues a ruling,he said, the Libertarians will file anotherunconstitutionality action againstRedondo questioning other measures hetook to speed up the passing of the taxplan last month (TT, June 11).FIRST proposed in 2002 by a commissionof former finance ministers, thePermanent Fiscal Reform Package aimsto increase government revenues and permanentlyreduce the country’s spiralingfiscal deficit by creating new taxes andimproving collection of existing ones(TT, Dec. 5, 2003).Costa Rica’s fiscal deficit for the firstsix months of this year was equal to 1.21%of the country’s gross domestic product(GDP) – within the government’s target ofless than 3.5% of the GDP for the entireyear. In 2003, the fiscal deficit was equalto 4.1% of the country’s GDP, according tothe Finance Ministry.The deficit remains a major source ofconcern for the country’s economic stability.The 15.1% increase in governmentrevenues reported during the first sixmonths was overshadowed by a 15.8%increase in interest payments on thecountry’s debt, according to the FinanceMinistry.Agustín Carstens, deputy managingdirector of the International MonetaryFund (IMF), while in Costa Rica last week,urged the country to pass the tax plan toreduce the fiscal deficit.He said the government could graduallyreduce the amount of the annual budgetused to pay interest on debt andincrease the amount of money availablefor the country’s social programs (TT,July 16).

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