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Tax reform stalls at year’s end

December 22, 2011

Hopes of seeing Costa Rica’s new tax package unveiled before 2012 withered on the vine last week when the Constitutional Chamber of the Supreme Court (Sala IV) suspended a fast-track plan that would have limited the debate over the latest iteration of the reform package and forced a vote in the Legislative Assembly by Dec. 23.

Legislators said they likely will work through the holiday season, but doubts remain about whether any kind of reform package will see the light of day any time soon.

Assembly President Juan Carlos Mendoza told reporters Wednesday that the fiscal reform plan is too important to rush through the legislative process, and that he regrets supporting the motion to fast-track the plan earlier this year.

“They are interpreting the procedure to make it work for them,” Mendoza said, referring to lawmakers, including some members of his own Citizen Action Party (PAC), who support fast-tracking the plan. “They’re introducing the guillotine. They’re introducing this concept that will allow them to stop discussing the motions and go straight to a vote, where in the past, the concept was never used in the full session of Congress.”

An agreement on a new fiscal plan is needed quickly. Costa Rican Finance Minister Fernando Herrero pointed out recently that the country’s debt is growing, and delays in approving a plan, which would include new tax schemes, means the government will go further into debt in order to continue to provide government services.

The Sala IV’s ruling last week derailed any plans of holding a final vote on the issue before the end of the year. The court froze the fast-track provision for the plan until it can review the measure’s constitutionality. The review was prompted by a complaint by lawmaker Luis Fishman, of the Social Christian Unity Party.

Lawmakers have been reviewing the thousands of individual motions that opponents to the reform bill have presented in the assembly. When that process is complete, the first official legislative debate on the issue can begin. If an agreement is reached during the first debate, the assembly can vote on and pass the plan. The Sala IV’s ruling affects only the possibility of a second debate on the bill. Under the fast-track provision, legislators would be forced to hold a vote during the second debate.

Mendoza said the debate over fiscal reform in the assembly has become monothematic. “Each day I have more doubts that the project will become real,” he said. “The elements that will lead to its own destruction are in the bill itself. It has been designed to have no possibility of being approved.” 

Lawmaker Manrique Oviedo, of PAC, said that on Tuesday legislators left the assembly to prevent a quorum and delay discussion of the plan, a move that also prevented a vote that day on whether lawmakers will recess for the holidays or continue working toward an agreement.

Supporters of the fiscal plan want to take a recess and return at the end of January to hold twice-daily sessions in order to reach an agreement as quickly as possible. 

Others, like Mendoza, would prefer a slower pace that goes through established processes. “Instead of losing time with this wild horse, they should be talking about coming up with a new plan that follows congressional procedures,” Mendoza said.

Oviedo views things a little differently. 

“I believe that now, at this moment of the process, we are trying to build a scenario where 38 legislators can agree among ourselves to put an end to this thing and move on to other issues of national interest,” he said.

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