Roller-Coaster Year For Fiscal Reform

December 22, 2006

After five years of discussion, the controversial tax plan pushed by then-President Abel Pacheco (2002-2006) flopped in March after the Constitutional Chamber of the Supreme Court (Sala IV) ruled that the legislation was approved unconstitutionally.

New President Oscar Arias, who took power in May, tried to breathe new life into the legislation that lay dead for months and began sending parts of its nine-part tax plan to the legislative assembly in August.

By year’s end, three parts of the tax plan had arrived in the Legislative Assembly: a $200 tax on licensed businesses, a valueadded tax, and a tax on “luxury homes” meant to help eradicate shantytowns.

Other projects that remained to be sent to the assembly included an income tax; reform that would eliminate tax collection loopholes; a controversial 0.5% tax on financial transactions; a tax on so-called “free zones;” a reform that would redefine taxpayer rights and responsibilities; and a project to make more transparent how tax money is spent.

 

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