San José, Costa Rica, since 1956
Economy

President Solís proposes global income tax

Costa Ricans earning big bucks abroad should take note. Addressing the nation from New York on Sunday evening, President Luis Guillermo Solís announced two new taxes to improve the country’s fiscal revenue, including a global income tax. 

The global income tax, a first of its kind here, would require Costa Ricans to pay taxes on income earned outside the country. Solís, without offering details, said that his government would send the bill to the Legislative Assembly in 2015. 

“It’s clear to me that my administration, the administration of change, will have the obligation to take steps that have not been taken in many years. This will not be easy nor achieved without making sacrifices,” Solís said.  

The president also gave a timetable for when his administration would present a bill to create a value-added tax. The VAT would replace the current 13 percent sales tax while keeping the same rate. Spending on health care and education would be exempt. The bill will be presented to the Assembly before the end of 2014, he said.

Solís said the VAT would improve tax revenues by an estimated $555 million annually. Solís added that the reform would make tax evasion more difficult. The government has previously reported that Costa Rica loses an estimated 13.8 percent of gross domestic product to tax evasion, outpacing tax collection at 13.1 percent of GDP in 2013.

In August, the Solís administration presented a bill granting the government more tools to monitor and tax financial transactions, including a requirement that all businesses accept credit or debit cards as payment. 

The president’s comments follow a downgrade in its sovereign debt rating to junk status, from Baa3 to Ba1, by the ratings agency Moody’s Investor Services.

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Alex Leiva

Thanks, I didn’t have any reason to renounce to my Costa Rican citizenship, now I do.

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Bobpiazza

No doubt, Costa Rica has a terrible fiscal problem.

President Solís was correct recently in addressing some of the rampant corruption. Shouldn’t he continue to address the corruption in Costa Rica?

Collecting more taxes appears futile if a great portion continues to be filtered off by corruption and inefficiency.

Any of us who shop and purchase items imported already see a double or triple price cost. Of course, some of that increase is due to transportation costs (already noticed as full of corruption), but the increase is also due to import taxes.

Where is all this current tax money going?

If I remember correctly, there is over a 25% tax on fossil fuels. Where does this money go? Certainly little goes to road maintenance.

How do you gather income information for foreign workers? I doubt all foreign countries are not going to cooperate in submitting information.

What do you do for those foreign workers who are illegal and have no reportable income?

Again, President Solís was correct in addressing corruption. He should stay that course, but cannot make major achievements without the assistance of the full legislative bodies. I doubt the legislative bodies will cooperate because it may be contrary to their individual interest, ignoring the interest of the country.

Why do all the Costa Rican Presidents go to NYC all the time? Seems to me if they are seeking job creation they should concentrate more on the west coast. The only industry in NYC of meaning value is Wall Street, which has been proven to be riddled with corruption and greed.

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ExpatCR

One of the greatest problems the government has regarding taxes is that they are very inefficient in collecting them. I think the figure I heard was around 60% are collected. Their solution to this problem is to just invent more taxes. Wrong!!

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msibruce@aol.com

The Presidents proposals are just political theater designed to show the credit rating companies Moody’s et al that Costa Rica is trying to deal with its deficit and save the countries plummeting credit rating from further declines.

A few weeks ago he told us in his ” 100 days ” speech that the government is fraught with corruption, mismanagement, and waste.

Now he is proposing that we pay more taxes to feed this inept bureaucratic corrupt mess.

What a joke.

Rid the government of corruption President Solis. Make it efficient before you ask for more money.

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Wolfgang

As always: costa rica has no idea of a fair tax. Why not taxed correctly first of all lawyers, doctors, engineers, companies …..? Why pay a lot of foreign companies little or no tax? The whole thing is idiotic.

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jaf

Global income tax in a country that refuses to allow you to renounce citizenship… yeah, that’s ethical. That’s called TYRANNY by the way.

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jaf

I correct myself. You can renounce.

Still, only two countries in the ENTIRE WORLD tax international income. Nice job.

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