Divisive Tax Plan Faces New Hurdles

April 15, 2005

MONTHS after some legislators declared PresidentAbel Pacheco’s Permanent Fiscal Reform Package deadin the water, the controversial tax plan is still strugglingfor life on the floor of the Legislative Assembly.However, new developments threaten to send thereforms back to commission, where many fear its opponentswill snuff it out for good with a new onslaught ofproposed amendments.Objections spawned more objections in recentweeks, culminating in the elimination of the plan’s bestchance for speedy approval.Tax plan critics say long-awaited legislation to createa “fast track” for certain bills – a procedural innovationdesigned specifically with the tax plan in mind (TT,March 11) – cannot be applied to the plan after allbecause it violates the Constitution.The regulatory reform, approved last month, only applies to bills that can be approved with asimple majority (29 of 57 votes). Becauselegislative authorities have now decidedthat a two-thirds majority (38 votes) is necessaryfor the tax plan’s approval becauseof constitutional issues, the regulatoryreform does not apply.LEGISLATORS from the NationalLiberation Party (PLN) have proposedsending the plan back to commission sothat the elements that contradict theConstitution can be removed.Libertarian Movement Party members,among of the tax plan’s most active critics,appeared scarcely able to contain their gleeat the prospect. Federico Malavassi, theparty’s leader in the assembly, told the dailyLa Nación he would “plaster (the plan) withmotions” if it is sent back to commission.The party’s presidential candidate, OttoGuevara, told The Tico Times he is “verycontent” with Liberation’s proposal.“I am very sure (opponents in the commission)will want to change things,” hesaid. “All this plays in our favor. The moretime passes, the greater the chances that thetax plan will not be approved this year.”In addition, any modification to theplan in commission could affect other legislators’support for it, clouding its futurestill further, according to Guevara.“Sending it back to commission is likeopening Pandora’s box,” he added.THE key to Pandora’s box, in this case,is a report justices of the ConstitutionalChamber of the Supreme Court (Sala IV)sent in April 2004 to legislator and tax-plansupporter Mario Redondo of the SocialChristian Unity Party (PUSC), then-presidentof the assembly.The report outlined the justices’ objectionsto the tax plan on constitutionalgrounds, but Redondo never showed it tomembers of the commission charged withevaluating the tax plan.Redondo told La Nación that the SalaIV is at fault for sending the report to theassembly president instead of the commissionhead, and said 99% of the report’scriticisms have been incorporated.However, the daily reported that variousarticles to which the justices objected havenot been changed.Besides ruffling feathers about whatsome called deliberate suppression of theobjections, La Nación reported, the court’sobjections included one apparent constitutionalviolation that caused the assembly todecide the plan needs a two-thirds majority.THE Government Attorney’s Officewent one step further. When Liberationlegislator José Miguel Corrales asked thatthe office examine whether the tax planrequired a simple or two-thirds majority,the ensuing report, released in December2004, said the constitutional issues posedby the tax reform are irreconcilable,regardless of how many legislators votedin favor of the plan.The crux of the problem: the plan wouldallow citizens to file their tax informationdigitally, and therefore allows the tax authority’semployees to examine citizens’ files.Article 24 of the Constitution states that theright to privacy for written, verbal and othercommunications is inviolable.The article goes on to authorize “competentofficials of the Finance Ministry andComptroller General” to “examineaccounting books and related documentsfor fiscal purposes” and control the correctuse of public funds, which, according toRedondo, puts the tax plan in compliancewith the law. However, the justices’ reportstated the examination of computer filesand e-mails by fiscal authorities violatesArticle 24, according to La Nación.THE amount of time required to makechanges to the plan in commission isunclear. Despite Malavassi’s and Guevara’sassertions that a new wave of motions wouldslow the bill, economist and Liberation advisorWilliam Corrales told The Tico Timesthe proposal legislators are drafting for thereevaluation process will set a short, specifictime frame for the changes.“The plan would go to a special committee,likely composed of five legislators,”Corrales said. “The commission would havea short period of time, probably a couple ofdays, to make the changes (related to theconstitutional issues). The plan would returnto the assembly floor, corrected, and the ‘fasttrack’ measures would apply.”Corrales said no additional motionswould be accepted after the tax planreturns to the general assembly.“If that door is opened, it would bevery dangerous,” he said.This is the 32nd month in the assemblyfor the tax plan.Designed by a group of former financeministers seeking to increase governmentrevenues and enable Costa Rica to betteraddress its growing budget deficit, the plan,which would levy new taxes and, accordingto its proponents, improve the collection ofexisting taxes, has gone through countlessmodifications and made several trips to theSala IV– thanks in large part to approximately1,000 proposed amendments, mostfrom the Libertarian Movement Party (TT,Aug. 20, 2004).

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