Solís administration proposes bill to cancel tax debts for some tourism businesses

President Luis Guillermo Solís on Tuesday evening sent the Legislative Assembly a bill proposing the cancellation of a backlog of sales taxes, interest and fines for tourism businesses as stipulated by a new provision of the country’s Sales Tax Law that took effect Aug. 1.

In August, the Finance Ministry ordered tourism businesses to collect sales tax on tourism activities that were previously exempt based on an interpretation of the Sales Tax Law from 1982. The new regulation resulted in a decree requiring all recreational activities including rafting, diving, surfing, ziplining, hiking and others to be taxed retroactively up to four years.

Tourism businesses have since been urging Solís to block the decree, arguing that collecting retroactive taxes would lead to business closures, layoffs, a loss of competitiveness and a decrease in investment.

“We fully understand the importance of tourism for our economy. This initiative we are sending today to lawmakers demonstrates the government’s understanding of the needs of the tourism industry and their will to keep providing benefits and profits to Costa Rica,” Solís stated in a press release.

Vice President Ana Helena Chacón said one of the reasons the decision to cancel the debts was made was because “there was never a warning issued to the tourism sector that they would be charged [sales] tax on recreational activities that were previously exempt.”

Chacón added that Costa Rica “would be charging taxes and interest to business owners who were hurt by a drop in tourism visits in 2008-2009 caused by the international financial crisis.”

The bill states that companies that paid taxes after the decree’s approval would be unable to receive refunds because those taxes were paid by customers.

On Wednesday, the National Liberation Party’s top lawmaker, Rolando González, said he agreed with the decision to support the tourism sector, “one of the country’s hardest-hit sectors by the financial crisis,” but his party would not accept a bill that fails to calculate how much the move would cost the government in lost tax revenue.

González’s comment referred to a statement by Vice President Chacón on Tuesday that the government is unaware of the actual revenue the Tax Administration would lose, or the number of businesses that would benefit if the bill is approved.

Chacón said the administration likely would conduct that study in coming weeks.