Francisco Villalobos is on a mission to reduce tax evasion in Costa Rica.
It’s no easy task. In 2010, the Comptroller General’s Office reported that more than 60 percent of eligible citizens didn’t pay income taxes.
Yet in just seven months as the general director of Costa Rica’s Tax Administration, Villalobos’ tireless efforts are starting to generate results. More than 200 businesses were shuttered last week due to tax irregularities, consumers are being encouraged to use debit and credit cards to reduce sales tax fraud, and a complete overhaul of the income tax payment system is under way.
To ensure that the word is out about the reforms in tax collection, Villalobos visited several news publications in recent weeks to provide a basic and clear explanation of what is required of taxpayers.
“The obligation of taxes has nothing to do with nationalities, whether you are Tico or a foreigner,” Villalobos told The Tico Times. “As citizens of this country, we all share the responsibility to pay taxes. It is a duty.”
Villalobos encouraged readers to pay income tax advances, or partial payments (pagos parciales), before Sept. 30. The national income tax model is being altered, and, in 2012, income taxes must be paid in quarterly increments instead of a year-end lump sum. The trial run for the new quarterly income tax payment system begins now.
“In the U.S., residents can pay income tax advances every quarter instead of just one payment at the end of the year,” he said. “That is the system we are putting in place in Costa Rica as well.”
National taxpayers must pay a piece of their annual income tax total for 2011 before Sept. 30. The amount will be a quarter of total income taxes paid in 2010 or an average quarterly sum of income tax payments made during the three previous years. Payments made after Sept. 30 will be subjected to interest rates.
Forms to pay the income tax advances (D-108) can be obtained at all national bank branches or paid online at dgt.hacienda.go.cr. To make payments online, users must download the Finance Ministry’s free EDDI-7 software from the website and complete the forms digitally.
Villalobos said answers to tax questions in English can be found by clicking the link labeled “Frequently Asked Questions about tax matters in Costa Rica,” located on the right panel of the Finance Ministry home page. He also encouraged readers to submit questions in English. Email addresses for Finance Ministry personnel can be found under the “Contáctenos” (“Contact us”) link near the top of the home page.
A second priority for Villalobos’ visit was to inform readers that the EDDI-7 software allows for sales and income taxes to be handled entirely online. Once the software is downloaded, income and sales tax forms can be filled out at home and filed electronically. Documents are expected to be ready in English in upcoming months.
For annual Dec. 15 income tax payments, Villalobos said that all owners of lucrative and active sociedades anónimas, or S.A.s, are expected to file. Owners of inactive S.A.s that are not involved in transactions, such as those set up for ownership of boats, cars, homes and property lots, are not required to make income tax declarations.
“Anyone that has an S.A. involved in transactions of goods or services, rents a house, receives rent, or is actively receiving an income, must declare income taxes by Dec. 15,” Villalobos said. “Those with inactive properties or goods are not required to do so.”
Annual income taxes can also be paid using the EDDI-7 software and can be done by debit and credit card. They can also be paid by printing out the completed documentation online and bringing it to national bank locations.
Finally, Villalobos said the Finance Ministry encourages consumers to use debit and credit cards for transactions. He said that because card purchases are recorded electronically, they assist to reduce the large amount of national sales tax evasion.
To entice consumers to use plastic, the Finance Ministry is randomly awarding users with cash giveaways. On Tuesday, Olga María Jiménez, who made a purchase with her Bancrédito card, was awarded ₡3 million ($6,000) during the Finance Ministry’s first lottery under the “Solidarity Points” program. Four more lotteries and cash giveaways for card users are planned this year.
Sales tax collection is up 22 percent this year compared to 2010. Villalobos said his goal is to reduce income tax evasion to around 40 percent in 2011.
To download the Finance Ministry’s free EDDI-7 software, see: http://dgt.hacienda.go.cr/oficina/herramientas/Paginas/EDDIElaboracionDigitaldeDeclaracionesdeImpuestos.aspx