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Costa Rica Reduces Debt Through Improved Tax Collection, But Still Faces Budget Challenges

Article Summary:

The government of Costa Rica was able to reduce its bloated budget deficit in 2011 by about 1% of GDP through improved tax collection, but the fiscal situation remains delicate. The government of President Laura Chinchilla, with the support of the Citizen Action Party (PAC), the largest opposition, is pushing a plan to increase various taxes, which collides with strong opposition from business, organized labor and other political sectors.

Photo Credit: Estrategia y Negocios

Original Article Text From Estrategia y Negocios via Google Translate :

Costa Rica Achieved by Reducing the Fiscal Deficit

The government of Costa Rica was able to reduce the bloated budget deficit in 2011 by about 1% of GDP through improved tax collection, but the fiscal situation remains “delicate”, said Monday the ministry of finance.

“We made a great effort to collect taxes more effectively” and the result is that the deficit was 5.5% of Gross Domestic Product (GDP), as expected, but at 4.4%, said in Press Conference Area Minister, Fernando Herrero.

Smith explained that the acute financial crisis, tighter controls were applied and increased the number of audits, which are able to increase revenue, but “also made a major effort to reduce costs”.

However, the minister warned that the country’s fiscal situation “is still sensitive,” and you need the approval of a tax reform to increase revenue.

“Soon we will be putting 900,000 million (U.S. $ 1,800 million) of bonds in the financial market,” which will affect the availability of resources to the private sector, he said.

The government of President Laura Chinchilla, with the support of the Citizen Action Party (PAC), the largest opposition, pushing a plan to increase various taxes, which collides with strong opposition from business, organized labor and other political .

The initiative aims to increase from 13 to 14% value added tax, consumption-establish global and universal income and reduce exemptions for foreign companies in the free zone regime, among other measures.

The project was slowed by an action brought by a deputy of the opposition Social Christian Unity Party (PUSC), alleging unconstitutional and was hosted by the Constitutional Chamber of the Supreme Court.

The fiscal plan could be approved by Congress in their first debate, but its final approval (in a second debate) could only occur when the Constitutional Court resolve the merits of the appeal.

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