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Tourism chamber leaders vow to escalate fight against added sales tax

September 9, 2014

Leaders of the National Tourism Chamber (CANATUR) on Tuesday said they will use all available legal tactics to challenge a Finance Ministry order to start collecting 13 percent sales tax on all tourism activities, including several that previously were exempt.

CANATUR said it would file complaints with the Finance Ministry, the Tax Administration, the Administrative Court and the Constitutional Chamber of the Supreme Court, or Sala IV.

Later this week chamber members will file an appeal with the Finance Ministry asking minister Helio Fallas to revoke a Tax Administration decree ordering tourism businesses to begin collecting the sales tax and pay back taxes from the past four years. If the measure is enforced, the chamber said, many small tourism businesses would be forced to close.

The decree entered into force on July 30 and stemmed from a new Tax Administration interpretation of Article 1 of Costa Rica’s Sales Tax Law (No. 6826). Members of the tourism sector say the ruling affects the country’s competitiveness by calling for taxes on activities such as hiking, birdwatching, ziplining and horseback riding, among others.

Business owners argue that they have not been collecting the tax because they were never notified to do so. Some owners have received official notifications from the Tax Administration setting a Sept. 30 deadline to pay the back taxes.

Tax Administration Director Carlos Vargas also will be a target of the complaints, according to the chamber, which accuses Vargas’ agency of ignoring precedents set by the Government Attorney’s Office (PGR) “that clearly contradict their decree and the interpretation they made of the Sales Tax Law,” CANATUR President Pablo Abarca said.

Abarca claims the Tax Administration ignored previous PGR rulings, and that Article 2 of PGR’s General Law states that those rulings are legally binding for all government agencies.

Chamber leaders also are preparing a complaint against the Tax Administration in the Sala IV, arguing “the tourism sector was not consulted before ruling on new tax legislation.”

The Administrative Court action – a separate measure from the Sala IV complaint – will demand the government find a legal way to resolve the issue.

“We have been open to dialogue, but we can’t wait any longer,” Abarca said. “The tourism industry requires specific actions to halt this interpretation of the law that we believe is wrong, that undermines competitiveness and that threatens the future of the tourism sector.”

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