Money And Taxes
In Costa Rica
By John Holtz*
At great
risk of having
the messenger
killed for
delivering the
bad news, I have
elected to write
about money and
taxes.
The newly
elected members
of Costa Rica´s
congress (Asemblea
Legislativa)
have abandoned
the critical
issues like
security,
traffic law
reform, health
and education to
focus on a pay
raise for
themselves.
Not 5%, 10%, 20%
but rather a 60%
pay raise for a
base salary of
almost $8,000
per month
depending upon
the exchange
rate, plus just
a pot full of
perks and
benefits
including cars,
drivers,
insurance,
expense accounts
and a never
ending list of
unaccounted crap
that all elected
officials all
over the world
get. (¨Heal
thyself¨, said
Socrates, and
they are.)
I can just see
Presidenta Laura
saying to the
representatives,
¨Good news, you
have voted
yourself a
humongous raise
in salary and I
do support it.
Bad news, we do
not have the
money to pay
you!¨
Note: It seems
that in Costa
Rica all raises
in everything is
in huge
increments.
Twenty percent
here, 50% there
and even 60% in
the cost of
gasoline,
electricity,
water, etc. That
can add up don´t
cha know?
Employees
receive a cost
of living
increase twice
each year and
for the most
part that is
between 3% and
5%.
But, the
congress wants
60%.
If congress gets
60%, then what
should the
minister of
education,
minister of
work, minister
of environment
and all the
other ministers
who fall over
each other every
day of the year
get?
Here we are,
just crawling
out of a big
economic
¨crisis¨ that
every other
country in the
world calls a
¨recession¨
except us and
these guys want
a 60% pay hike
and have been on
the job less
than a month.
The irony is
that our
coffers, the
till the
government¨
bodega¨ whatever
you want to call
it is bare
without funds
but with a lot
of debt and a
lots of promises
ranging from
repairing 48
bridges that are
death traps to
making our
communities safe
places.
But….still no
money!
What will
Presidenta,
Chinchilla do?
(Stop reading
right here if
the ¨TAX¨ word
bothers you.)
If she is indeed
competent, she
will raise
taxes, cut
expenses and go
down as a very
unpopular but
essential
president of
Costa Rica. And,
in my humble
opinion, that is
what the last
administration
set her up to do
while in 2014
the other Arias
brother will
ride in on his
white horse.
Remember, almost
at mid-term,
behind CAFTA and
on the back
burners of the
Oscar Arias
administration
has always been
a fiscal plan
like taxing
global income,
increasing
gasoline and
sales tax,
increase real
estate tax,
cracking down on
evaders and
making the
Hacienda (Tax
organization) a
powerhouse
similar to
developed
countries
including, but
not limited to,
the United
States. (He
likes to think
big.)
It was even
thought about
taxing all
financial
transactions
including ATM
transfers into
Costa Rica and
check cashing. A
little weird,
but none the
less someone was
thinking about
it and that
alone scares me.
(No comment)
Now, to be
realistic, very
little of these
tax ideas will
ever pass.
Some of them
might, like
global income
tax where if you
earn money
outside of CR
and when it is
brought into the
country it´s
taxable income.
Just like in the
US. Will this
apply to foreign
residents and
pensionados? It
seems likely but
I do not know.
It would if we
lived in the
USA.
Perhaps we will
see an increase
in the annual ¨marchamo¨
on cars and a
special gasoline
tax.
More likely what
will be adopted
is the system
used by former
President,
Calderon, now
convicted felon
Calderon out on
appeal. He
raised the sales
tax 2%, across
the board until
enough funds
were found to
pay for all
those debts. To
his credit, he
reverted back to
the original tax
base when it was
possible. The
first time I
have ever seen
that happen.
He even had a
lottery.
Customers needed
to request a
printed receipt
from the vendor
and on the back
she/he wrote
their name and
phone number. If
one of the many
lucky ones
picked, she/he
got a pass on
further taxes.
What this did
was make sure
private
enterprise
collected and
also reported
the taxes of
each sale. Very
simple, very
clever. Too bad
he is headed for
the slammer.
La Presidenta
very much favors
taxing the so
far untaxed
sports books and
casinos 2% of
their take and
she makes no
excuses for it,
either. Their
free ride is
about over and
that makes
sense.
It is not just
taxes, but also
the ability to
collect them and
that is an
exercise which
we dearly lack.
It is much
easier to focus
on a sales tax
and if you want
that
product….you
gotta cough up
2% or 3% more to
buy it.
The reality is
that we have new
infrastructure
to pay for and
senior
infrastructure
that screams for
maintenance.
We have a
bankrupt public
health care
system in which
the government,
yes the CR
government
itself is 50%
delinquent in
making its
required
contributions,
we have schools
at every level
years behind for
lack of funds, a
housing crisis
for the poor
second to none,
and a critical
need to improve
security all
with a national
debt that would
sink the
Titanic.
We need money!
Please send your
check or money
order to… Me,
care of this
news outlet.
*John Holtz is the Executive Director of
theCenter for
the Studies of
Modern
Management
www.modernmanagement.org and can
be reached at:
[email protected].
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