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Costa Ricans Amongst the Least Taxed in the Region

Article Summary:

While other Central American countries are adopting revised and new tax codes to raise their gross domestic product, Costa Rica remains stagnant and sits alongside the least taxed countries in the region.

Photo Credit: El Financiero

Original Article Text From El Financiero via Google Translate :

Ticos Among the Least Taxed

For the past four years, Central American countries have approved up to two tax reforms per country (for Guatemala and El Salvador), a step that is allowing them to raise about an additional 1.3% of gross domestic product (GDP) and increasing their tax burden.Costa Rica went blank.

After the fall of the tax reform bill that drove the administration Chinchilla, the country’s tax burden, which is 13.3% (excluding social security contributions), was below the regional average (14.7%).Only Guatemala and Panama show tax burdens lower than that of Costa Rica (11.2% and 12.2% respectively), but both expected effects of its recent tax reforms passed this year.

¿Switzerland of Central America?
Although there are specific and alerts for each country that do not allow any of the cases off the red light, the situation of Costa Rica stands out for the country’s prolonged inability to implement reforms in tax structure that will allow, for example, reduce inequality.If in 2010 the highest salary was 17 times the lowest, in 2011 the difference was 18 times, a trend that has continued and reflects the growing direction of the Gini coefficient since 2005, as revealed Economist Michael Loria.

“Costa Rica increasingly resembles Central America, and in basic education coverage was surpassed by Panama. Before I wanted to resemble Central Costa Rica, “said economist and researcher at the Central Institute for Fiscal Studies (ICEFI), Jonathan Meikos, referring to the small country’s ability to increase social investment.

In the regional context, the country delays sum away from modern tax structures, which aggravates the poor country’s tax structure, as currently only 34% of total revenue comes from the side of the income tax or direct ( considered more progressive or fair).

“Tax reforms in the region have the central point of the income tax modernization.”Maynor Cabrera Economist ICEFI”Costa Rica is pressed to be discussed, not a tax plan, but an entire reform of fiscal policy.”Jonathan Meikos Economist ICEFIBy contrast, the other Central American countries have implemented reforms that do have focused on the issue of income.

The situation puts Costa Rica in the fiscal scenario more vulnerable in the region, with a fiscal deficit for 2011 of 5.3% of GDP, followed by Honduras (4.8%) and Guatemala (3.3%) .

Lack of transparency
Together with the low tolerance of the contributors to new taxes, fiscal transparency indicators show that Costa Rica has encouraged citizens to acquire the necessary expertise to understand the tax issue.The Open Budget Index ( Open Budget Survey ) puts us a note 47 points out of 100, because the country does not offer the drafting of a citizen’s budget (easy to understand text on spending plans).

The organization sees the country as a lack of information gaps and low participation in the process.However, the drop in tax plan generated cries of alarm.”The fiscal problem is serious,” warns the Central Bank president Francisco de Paula Gutiérrez, saying that, is stricter than spending cuts, you can not solve the fiscal gap Costa Rica.Same position has Miguel Gutiérrez Saxe, director of State’s Office.

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From El Financiero

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