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Costa Rica looks to take itself off tax haven list

February 26, 2010

Friday morning found more than one hundred dark-suited men and women in a windowless meeting room of the Intercontinental Hotel, plotting how to remove Costa Rica from the international list of tax havens.

It´s been nearly a year since Costa Rica was identified as a so-called tax haven due to outdated legislation that makes exchange of information on suspected tax evaders complicated and time-consuming. The Central American country was hit with another slap in mid-February when France announced it would levy high sanctions on interest and dividends earned in the country.

“Costa Rica is recognized in the world as a haven for peace, a haven for ecological tourism, a haven for the respect of human rights; but under no circumstance, can we or do we want to run the risk that Costa Rica is perceived as a tax haven,” said Rodrigo Arias, minister of the presidency, at the Friday morning forum.

The worldwide recession has motivated developed countries to clamp down on suspected tax evaders, looking for additional income for cash-strapped budgets. With the participation of countries around the world, the Organization for Economic Cooperation and Development (OECD ) drafted an international standard for the exchange of tax information and got dozens of countries to sign on to it.

“We´ve made more progress in 10 months than we have in 10 years,” said Pascal Saint-Amans, head of the international cooperation and tax competition division of OECD. “The standard for the exchange of tax information is now almost universally accepted…. There are no more safe places to hide money to avoid paying taxes.”

Costa Rica has dragged its feet in the process of subscribing to international tax standards, but Finance Minister Jenny Phillips has pledged her commitment to meet OECD demands. In order to make it off the list of havens, Costa Rica must sign information sharing agreements with 12 countries (it has one now and nine pending) and adopt new national legislation.

Phillips said the legislation has been drafted and is now before the Legislative Assembly. Though she said she will push for legislators to pass it before they leave office in May, she also recognizes the tight timeframe.  

“Two months is very short in order to pass a reform like this one,” she said. “But after hearing what was said today(Costa Rica could face more sanctions), … Today it´s France, tomorrow it could be another country… and some of the sanctions could come from international organizations such as the World Bank.”

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