San José, Costa Rica, since 1956

Stick to peace planning, says PAC founder of ex-President Arias’ plan to reduce Costa Rica’s fiscal deficit

Costa Rica’s former two-term President Óscar Arias on Tuesday announced a proposal to reduce the country’s fiscal deficit that included a mix of both direct and indirect taxes.

Arias’ proposition urges the administration of President Luis Guillermo Solís to reduce spending by 2 percent of the gross domestic product in the next two years, while increasing tax revenue by 3 percent in the form of new taxes.

To achieve that, the former president and Nobel Peace Prize winner, who served from 1986-1990 and 2006-2010, recommends a coalition of union leaders and representatives from the business and political sectors.

Costa Rica’s Finance Ministry and Central Bank expect the country to finish the year with a fiscal deficit of 6 percent.

Arias called for a national accord between members of the Solís administration, business leaders and other members of the private sector, as well as political parties and unions to seek a viable solution to the fiscal deficit problem. He said Costa Rica should seek to promote dialogue similar to Spain’s “Pacto de La Moncloa,” a series of economic reforms achieved in the late 1970s. The goal, he said, is to find common ground between those who support new taxes and those calling for spending cuts.

Arias, from the National Liberation Party, said he opposes the Solís administration’s plan to shift from a national sales tax to a value-added tax and a new global income tax.

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Earlier this month, ratings agency Moody’s downgraded Costa Rica’s bond rating to junk status, citing the country’s growing fiscal deficit and the failure of a proposed 2015 budget to cut spending.

Next year’s budget proposal currently is under discussion in a Legislative Assembly commission, where it has faced strong criticism from opposition parties – and even a leading member of the president’s own party, Ottón Solís. Responding to complaints that proposed spending is too high, the administration yesterday offered to slash $408 million from the proposal.

Lawmakers have until November to pass the budget.

No love lost

Citizen Action Party founder and Assembly Budgetary Commission President Ottón Solís criticized Arias’ proposal, saying the former president “lacks the moral authority” to discuss deficit reduction.

“[Arias] can talk about peace plans, but not about fiscal plans,” Ottón Solís said Tuesday.

President Luis Guillermo Solís also probably won’t be paying too much attention to Arias’ statements.

“I’ve had conversations with the finance minister about why his [Arias’] opinion isn’t viable,” President Solís said on Tuesday. “The transition from a sales tax to a VAT [value-added tax] with a global income tax has been proven in other countries not only to be viable but also ideal in reducing the deficit, as international credit ratings agencies have been requesting for years.”

President Solís added that, “It seems to me that Dr. Arias had the chance to lower the deficit during his administration after having two years of surplus, but he didn’t.”

When he left office in 2010, Arias passed on to his successor, Laura Chinchilla (2010-2014), a deficit of nearly $1.2 billion, about 5 percent of GDP, according to former Finance Minister Fernando Herrero.

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Don Blake

Stop introducing taxes!….you are just taking the easy way out all the time!!!….create jobs, do your job!!!…Costa Rica has more taxes than most first world economically strong countries!….this country is going to wither and die if you keep raising taxes…where is the thinking, where is the intelligent stratgy for the short, mefium and long term??? There isn’t one…..let’s just put up taxes….nobody here can afford more taxes, and you can’t even collect income tax and caha tax from your own people now….why don’t you focus on doing that right before introducing more taxes, that some government half wit won’t even be able to implement or administer properly!. …It’s a complete joke, and a horrible, horrible mess!!!

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TLC ! TLC ! TLC ! Idiots.

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How dare the EX prez Arias gives his thoughts on the problems in Costa Rica. First the Ex Prez is full of Crap he is the problem and was the problem. I know most average Costa Ricans would like to see the EX Prez in jail and his brother behind bars for all the crap they did to Costa Rica. Prez Oscar Arias only looks out for himself. Prez Arias has taken money from the CIA and has an agenda on the new goverment. CIA wants the new prez out and they use Prez Arias as there puppet. EX Prez Arias has an agenda he hates the fact he has no Control now over CR and the agenda of the goverment. Prez Arias sits on many boards on local companies and has lots of power over many people. The best thing the new goverment could do is put DR Arias in jail.

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