Previous perspectives

By Steve Young

The money shortages facing the Costa Rican government are real and well-known. While new police are hired, existing police in places like Manuel Antonio and Lake Arenal are woefully underequipped. In Tilarán, a police car was out of service for lack of a $65 part, with the local expat community passing the hat to try and get it back in service. In Manuel Antonio, police don’t have handcuffs.  Even if the Constitutional Chamber of the Supreme Court (SalaIV) allows the police to do their job by easing their latest ruling restricting random stops (speaking of handcuffs…), there are far too few prosecutors, judges and jails to deal with the ever-rising crime levels that threaten every citizen, resident and tourist. 

Yes, the legislature needs to reexamine those laws that give too much leeway to criminals and virtually require that criminals be caught in the act. Is there really no law against possession of stolen property? But that’s another subject. 

Here, we are concerned about money and the lack of it; and how the government can get more of what they are legally entitled to, and use it to fund more of what the country needs.

Roads and bridges are in a serious and life threatening state of disrepair. No funds are budgeted for the maintenance of bridges that are long past their useful life. The central government passes off much of the road maintenance to municipalities, without passing on the money to pay for that added responsibility. Fingers are pointed and voices are raised, but nothing seems to happen.

However, the money is here – in the underground and undeclared economy. The lack of serious attempts at tax collection by the government is the culprit.

Having lived here slightly more than two years, I do not pretend to understand much of Tico culture. But some things are obvious to even the most casual observer.

People pay only a fraction of the taxes they owe, and the government makes little effort to collect undeclared and unpaid taxes. The undervaluing of real estate is so common that it is recommended, with a straight face, at real estate seminars for first-time Costa Rica investors. A summary of closing costs in a lecture by a well-known Tico realtor includes a line showing 20 percent of the actual sale price as the price usually recorded in the National Registry.

Lawyers who handle real estate sales ask buyers at what value they want their property recorded. Neighboring property owners cringe at anyone with the temerity to actually value their property correctly, as this might shine the lazy eye of the municipality on their own undervaluations.

Some professionals, such as lawyers and doctors, follow the lead of most small businesses by only accepting cash for services, as credit cards may leave a paper trail of income.

The need for money is real, but the president and the Legislative Assembly look for the easy way out, proposing yet more taxes (on casinos, corporations, luxury houses) rather than looking honestly at the pervasive and openly flaunted tax cheating that goes on all around us.

A professional real estate and escrow industry, and a requirement that notarized sales contracts be filed at the registry (with criminal and financial penalties for lawyers and others underreporting sales information) would be a first step in allowing more transparency into the system, and lead to more desperately needed revenue for the country.

Costa Rica says it wants to be a first world country, yet turning a blind eye on tax cheats of all kinds makes that dream all the more distant.

Steve Young is a retired municipal official from California who moved to Costa Rica in 2008 with his wife and daughter. They live in San Isidro de Heredia.