• Costa Rica Real Estate

Constitutional Chamber of the Supreme Court gives tax reform bill the go-ahead

November 25, 2018

The Constitutional Chamber of the Supreme Court declared on Friday that Costa Rica’s tax reform bill is constitutional. The bill will now go back to congress, where enough legislators have announced their support for the bill for it to pass.

The court ruled on three issues put forward by legislators who claimed the bill violated the constitution. One of the main issues put forward was that the bill affected the judiciary’s independence. Costa Rica’s Plenary Court made that ruling in mid-October. This caused doubt about the bill’s chances of passing, since the ruling meant it would need a supermajority of 38 votes to pass a second congressional debate.

This uncertainty surrounding the proposed bill caused Costa Rica’s credit rating to drop and the currency passed 600 colones per U.S. dollar for the first time in history in early November.

Friday’s ruling means that the bill now needs a simple majority to pass. Enough legislators from multiple parties have already declared they will vote to approve the bill.


To find out more about what’s in the tax reform bill, check out our episode of The Tico Times Dispatch on the topic:


The bill is meant to address Costa Rica’s growing public deficit. The country finished 2017 with a deficit of 6.2 percent of GDP in 2017 and is expected to grow to 7.2 percent at the end of this year. The Central Bank of Costa Rica warned that if the deficit isn’t contained and some type of tax reform isn’t passed, the country would face an economic downturn.

The bill also sparked a nationwide strike that started on Sept. 10. The strike was organized by public-sector unions and caused major disruptions throughout the country. There were sparks of violence between protesters and police, and President Carlos Alvarado was violently confronted by protesters.

Albino Vargas, secretary general of the Union of Public and Private employees and one of the main architects of the strike, announced on Twitter that he was still planning to oppose the bill:

 

The bill will now return to congress for a second debate. If it passes, it will go to President Alvarado’s desk for final approval, marking his first major legislative victory since he took office in May.


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