Friday 06 April 2012
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Costa Rica News. News on Costa Rica continually updated.

The Taxman Cometh. The Taxman Resigneth.

In her fight to get tax reforms passed in Costa Rica, presidenta Laura Chinchilla may have made one critical oversight, not asking her staff if they were paying their taxes. Apparently not all of them were.

And as a result the Chinchilla administration, ready to complete its second year, has suffered yet another another cabinet loss. And an important one, one that might place the entire Plan Fiscal in jeopardy.

At the beginning of this week the head of the tax collection, Francisco Villalobos, resigned after paying up thousands of dollars in back income tax. Last week, his boss and the country's top finance man, the ministro de Hacienda, Fernando Herrero, tendered his resignation but not before putting up a fight and blaming everyone else save himself for not paying his fair share of income taxes on two properties owned by he and his wife, who just happened to be a presidential advisor.

Herrero is now being investigated for not paying the full taxes for the past 12 years on undervalued properties.

Although no one else has yet been fingered or come forward, several other members of Chinchilla's cabinet and high ranking government officials face similar accusations.

The Herrero, Villalobos, et al scandal was revealed in a series of publications by the daily newspaper La Nacion

But the fact that these were/are key people in the presidenta's proposed tax overhaul is a huge blow to the Chinchilla administration and its reforms.

Juan Carlos Hidalgo, Latin America analyst with Washington's Cato Institute, wrote on his El Financiero newspaper blog, ""In a [European-style] parliamentary system, it wouldn't be an exaggeration to say that a similar crisis would threaten to bring down the government".

But that won't happen in Happy Costa Rica, where the people elect its government (the president) and the 57 members of Legislative Assembly every four years.

The introduction of the tax reforms, which has been approved by legislators in first vote and has passed one of the hurdles (challenges) in the Constitutional Court, will mean higher taxes in a country already deemed pricey for the region.

The question for analysts is that if the taxman himself has proven to be an evader, why shouldn't the people be. One thing for sure, the Herrero/Villalobos situation is sure to reinforce the feeling by most to continue to evade paying (at least in full) their taxes and the people's perception that all politicians are dirty.

Pura Vida, Mae!




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