Lawmakers approve farmland tax reform in second vote

September 7, 2012

After months of negotiations between agricultural sector leaders, municipal officials and lawmakers from different parties, bill 18,070 passed a second and final debate in the Legislative Assembly on Thursday afternoon.

On July 31, more than 15,000 producers from across the country marched on the Costa Rican capital to pressure lawmakers to approve the bill, which initially proposed an 80 percent decrease in property taxes for farmers.

Small and medium-sized producers, who make up 90 percent of the sector, said a high tax rate on farmland was making it difficult to get by. As land value increased across the country, due to urban and tourist development, tax rates also increased, including on farmland.

On Aug. 20, legislators backed the farmers and approved in a first round of voting a bill to lower taxes on land used for agriculture, excluding big agro-businesses. The second and final vote was pushed through Congress on Thursday.

The new tax rate will be based on the historical value of farms, eliminating higher rates set by the Finance Ministry in 2008. Municipalities could then add a 20 percent “fee” to the final appraisal.

“We are very satisfied with the approval of this bill, because we demanded tax justice for a long time,” Guido Vargas, president of UPA Nacional, an organization of small- and medium-sized producers, said on Friday. “We are still waiting for the president to sign it into law.”

Responding to concerns that a tax exemption for farmers also would benefit large agricultural producers – including multinational companies – lawmakers called for a new standard that measures land use and production, among others parameters, to determine a producer’s size. 

The Agriculture and Livestock Ministry (MAG) will be tasked with creating the standard via a census that could take up to four years to complete.

Agriculture and Livestock Minister Gloria Abraham said on Thursday afternoon that she was pleased with the final approval of the bill and looks forward to the census, which her office had been requesting since 2010.

“In a city, both sectors need each other: Producers need municipalities to provide quality services, and municipalities are there to serve the community,” Abraham said.  “Both [sectors] have reached equilibrium.”

President Laura Chinchilla is expected to sign the bill into law in coming weeks.

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