President Solis says he is not concerned about tax reform effects on his popularity, has no intention to run for second term

(Casa Presidencial / Archive)

August 17^th, 2015 (ICR News) Costa Rican president, Luis Guillermo Solis said on Friday that he is not concerned with the effects that a tax reform plan being pushed by his administration could have on his already deteriorating popularity and approval rating, adding that he has no intention of ever running for a second term as president in the future.

Under Costa Rica law, a president is not allowed to run for a second consecutive term, but is allowed to run for re-election after spending one presidential term out of office.

Solis made the remarks after an event commemorating Mother’s Day at the Rodolfo Carit Hospital in San Jose.  Mother’s Day is celebrated each year on August 15^th in Costa Rica.

Solis said that most of his agenda in recent weeks has been focused on making sure the reforms pass, adding that he is pushing ministers and others in his administration to make the efforts necessary to convince the sectors involved that the reforms are urgent and necessary.

The reforms include ditching the current 13% sales tax in favor of a 15% value-added tax (VAT) on both goods and services.  Exceptions would apply for basic food staples and education services.

For most workers whose earnings fall within the taxable range, income tax would increase from 10% to 25%.

Transfer tax on motor vehicles would double from 2.5% to 5%.

Transfer tax on real estate would also double from 1.5% to 3%.

The Ministry of Finance also seeks to tax all types of capital gains, including investments, bank CDs, and real estate transactions, at 15%.

The plan also calls for increased tax enforcement and a number of measures to crack down on tax evaders.

Costa Rican president, Luis Guillermo Solis warned late last month that the country’s economy could not survive another year without new tax revenue to tackle the government’s soaring fiscal deficit.

The president had earlier promised upon taking office in 2014 to not raise taxes during the first two years of his presidency.

Strong Opposition

The reforms are facing strong opposition in the Legislative Assembly, with lawmakers from seven out of nine political parties opposing the reforms.

The parties in opposition to the reform: The National Liberation Party (PLN), Social Christian Unity (PUSC), the Libertarian Movement (ML), Costa Rican Renovation, National Restoration, Accessibility Without Exclusion (PASE) and the Christian Democratic Alliance, all believe that the Solis administration needs to cut public spending – including “mega salaries” paid to public servants – before asking the country’s citizens for more tax revenue.

Only the ruling Citizen Action Party (PAC) and the Frente Amplio (Broad Front / FA) support the reforms.