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(506) 2223-1327        Published Tuesday, Jan. 18, 2011,  in Vol. 11, No. 12           E-mail us
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Administration shaves proposed tax hike 1 percent
By the A.M. Costa Rica staff

The Chinchilla administration presented its tax package to legislators Monday, and the proposal contains a 14 percent value-added tax instead of the 15 percent levy that was predicted.

The reduction in the tax rate appears to be a concession by the administration to win more votes in the legislature. The plan is designed to reduce tax evasion and raise 500 billion colons or about $1 billion.

The new value-added tax will cover private schooling, private medical care, and more basic food products. There also is a doubling of the transfer tax on real estate.

President Laura Chinchilla did not participate, but Francisco Herrero, the finance minister, did as did Marco Vargas, the minister of the Presidencia. Getting the document was Luis Gerardo Villanueva, president of the Asamblea Legislativa.

As it stands, the proposals would have an impact on real estate sales and development and medical tourism, as well as traditional tourism and language schools.

The proposal, as well as others already in the legislative hopper, will be evaluated by lawmakers. They will receive opinions from the government and the public.

A medical tourism provider already produced a criticism. That appears today HERE.

The chamber that represents business owners said that its experts would evaluate the proposal. A statement from the Unión de Costarricense de Cámaras y Asociaciones del Sector Empresarial Privado noted that the Contraloría General de la República estimates tax evasion is as much as 3.6 percent of the gross national product.

A value-added tax is one way of reducing evasion because each taxpayer has to report on the individual or business before him or her in the supply chain. A supplier of raw materials would collect 14 percent tax on the product. A manufacturer would collect 14 percent on his wholesale price and subtract the tax the firm has paid to the materials supplier. The retailer would collect 14 percent tax from the final customer and subtract what was paid to the wholesalers when taxes are paid to the state. So each link in the chain would have an interest in making sure others pay their fair tax. Ultimately, the end consumer pays all the tax.

There still would be room to avoid the taxes. For example, properties can be sold as part of a corporation without payment of the transfer tax. And even when the property transfer tax has been paid, many buyers deliberately understate the value to reduce the tax.

Generally a value-added tax is a boon to accountants because the computation is complex. Under the Chinchilla plan, their services would carry a 14 percent value-added tax, too, as well as the services of other professionals like lawyers.
What tax bill would do

By the A.M. Costa Rica staff

Here is a basic outline of the Chinchilla administration tax proposal:

• No income tax increase for those earning 651,000 colons or less a month, about $1,300.

• Passive income like rents and interest would be subjected to a 15 percent tax.

• The current 13 percent sales tax would be replaced by a 14 percent value-added tax.

• Many now-exempt food products would be included in the new value-added tax

• Medicine would be exempt from the value-added tax

• A 14 percent value-added tax would be assessed on the services of professionals and contract workers, such as lawyers, accountants, physicians and dentists.

• A 14 percent value-added tax would be assessed on private health care.

• The tax would be assessed on utilities like water and electricity.

• Public transportation, buses and taxis, would be exempt from the 14 percent value added tax.

• Registered small- to medium-sized companies would pay from 10 to 25 percent income tax.

• A 3 percent tax would be assessed on the sale of property. That is twice the current rate.

• Tuition to accredited private educational institutions would be taxed at 10 percent. Tuition at unaccredited schools would be taxed at 14 percent.

A summary of the tax released by Herrero's Ministerio de Hacienda insisted that the tax burden would fall more on the well-off. That's because value-added taxes are considered to be regressive. The summary stressed that by reducing the number of food items that are exempt from taxes, the well-off who buy more such items would pay more tax. Basic foods would continue to be exempt. A graph said that the top fifth of the population in terms of income would pay 60 percent of the tax burden.

The summary said that now much of the exempt items are consumed by high-income earners. That also is the rationale to seek a 15 percent tax on passive income like rents and interest and why private schooling and private medical care is proposed to be taxed.

The text of the proposal will be published shortly in the La Gaceta official newspaper. That is when the full details become known. Reports so far have been based on summaries from the administration.

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Examples of the new white and yellow pages

New phone books are out
with a promotional pitch

By the A.M. Costa Rica staff

The telephone company is coupling the delivery of the 2011 directories with a promotion for its 1155 service.

The Cruz Roja began distributing the white pages and the yellow pages in the metro area last week. More than 1 million copies of the yellow pages will be distributed, as will 600,000 copies of the residential white pages, said the Instituto Costarricense de Electricidad.

The company also is making a step toward the future in distributing 300,000 copies of the same material on DVD. The disk is interactive.

The company noted that this saves the process of recycling phone books.

Cruz Roja workers will be accepting directories from previous years for recycling, too. They expect to collect more than 600,000. Traditionally, the workers receive a small tip for their efforts that benefits the rescue agency.

The telephone company has provided the Cruz Roja workers with T-shirts with the numbers 1155 on the back. This is the new yellow page information number.

Grupo ICE with its Radiográfica Costarricense S.A. also has put into service, an interactive Web page where companies can be searched by name and category.

The 1155 telephone number will provide the same information, and phone users have the option of sending a text message via the same number. Each message costs one and a half colons.

The directory has competition, but these firms are facing the same pressures of printing and paper costs that eventually will move all information services to the Internet.

Jacó hotel guard killed
 in parking lot mishap

By the A.M. Costa Rica staff

A guard at a Jacó hotel died Monday morning after a motorist backed over him, said the Judicial Investigating Organization.

The 46-year-old victim was identified by the last name of Quesada. The investigating agency said that the vehicle involved was a Hummer and that the motorist, 23, was detained because he did not have a license to drive.

The accident happened in the parking lot of the motel, agents reported. The driver appears to have put the vehicle in reverse and backed up. The guard died after being taken to a clinic.

Power cuts planned today
in Santa Ana and San Pedro

By the A.M. Costa Rica staff

The Compañía Nacional de Fuerza y Luz said it would be cutting power in Santa Ana and in San Pedro today.

The company said that the outage in San Pedro would be from 8 a.m. to noon while workmen move some lines. The area affected is in the vicinity of the El Higuerón service station.

In Santa Ana workmen will be installing a transformer. The Condominio Jardines del Sol will be without power from 8 a.m. until about 4 p.m., and part of the Residencial Hacinenda del Sol also will be cut off, the company said.

Our readers' opinions

Proposed tax will hurt
growing medical tourism

Dear A.M. Costa Rica:

Our letter is in response to the proposed 15 percent value added tax that could have a very harmful effect on the medical tourism industry in Costa Rica — the one tourism area that has been growing in recent years.

Costa Rica has an excellent medical tourism program, and the government, ProMed and the providers have done an excellent job in ensuring the quality of care available. The prices in Costa Rica are higher than in other medical tourism destinations such as India and Singapore, and the competition is growing every day as more countries enter the arena. Until now, affordable travel costs and Costa Rica’s proximity to the U.S. have allowed Costa Rica to remain competitive. If this tax is imposed, however, it will be very difficult to convince patients to come to Costa Rica rather than go elsewhere because the price will just be too high in comparison.

The Instituto Costarricense de Turismo estimates that 30,000 people sought medical and dental care in Costa Rica last year, and the real interest of U.S. patients is only just beginning. While the average vacation tourist spends approximately $100 per day, the medical tourist puts an average of $1,000 per day or more into the Costa Rican economy.

Are you really prepared to lose millions dollars in economic revenue and the jobs associated with medical tourism because of this tax? This would surely cut the number of medical tourist. Are you willing to lose the patients who will return for “vacation” tourism?

Taming a national budget is, indeed, a very difficult task. But to impose a tax on the one area that has been growing may well hurt the growth of the medical tourism industry in Costa Rica, and will certainly make the recovery of the tourism industry as a whole much more difficult. It may be easy to collect such a tax, but we strongly urge the government to look elsewhere for solutions rather than take a shortsighted approach.

We have a saying that seems appropriate here--- “Don’t bite the hand that feeds you”.

Timothy Morales
Costa Rican Medical Care
Lake Geneva, Wisconsin

EDITOR'S NOTE; Mr. Morales wrote his letter before the tax plan was presented with a 14 percent value-added tax instead of the expected 15 percent.

Legislative cars prompt
a response from Osa

Dear A.M. Costa Rica:

Did I read correctly this morning in the article about the legislature dealing with imposing more taxes that EACH ONE receives A NEW CAR?????????????

Are you serious????????

Are these the same people who were holding out for more money before they even started to work?????
Luxury TAX!!! Corp. TAX!!!!! Gas goes up and these people get a new
car!!!!!! Go figure !!!!!!!!

Do they have to pay the taxes on these new cars or are they exempt from that too. Don't cry about having no money to fix roads, boost education. No, just build a soccer stadium with no parking and give away free cars.

Frank Tortoriello

EDITOR'S NOTE; The vehicles are owned by the government and provided to lawmakers during their term.

Find out what the papers
said today in Spanish

By the A.M. Costa Rica staff

Here is the section where you can scan short summaries from the Spanish-language press. If you want to know more, just click on a link and you will see and longer summary and have the opportunity to read the entire news story on the page of the Spanish-language newspaper but translated into English.

Translations may be a bit rough, but software is improving every day.

When you see the Summary in English of news stories not covered today by A.M. Costa Rica, you will have a chance to comment.

This is a new service of A.M. Costa Rica called Costa Rica Report. Editor is Daniel Woodall, and you can contact him HERE!

From the Costa Rican press
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Real estate rollover

Cruz Roja suspends search for missing university student
By the A.M. Costa Rica staff

The Cruz Roja has suspended the search for Universidad de Costa Rica student who vanished in the Parque Nacional Chirripó Jan. 6.

The case bears similarities to those of two missing foreign tourists who vanished while on vacation here.

The missing university student is Nelson Alvarado Montoya, 24.

Cruz Roja rescue workers said they exhausted every possibility in the sprawling area around the country's highest peak.

Michael Dixon, a British tourist, vanished after he walked from his hotel in Tamarindo  Oct. 18, 2009.  David Gimelfarb, 28, vanished Aug. 11, 2009, after he went  hiking in Parque Nacional Rincón de la Vieja. Gimelfarb is
a doctoral student from Chicago.

In the case of Gimelfarb the Cruz Roja suspended the search after extensive efforts. The United States also contributed air support to no avail. Investigators failed to find any clues on the whereabouts of Dixon and put the case on the back burner. They speculated that he died in the sea, but no body has ever turned up.

Both the Gimelfarb family and the Dixon family members visited the country several times.

Alvarado is believed to have been in the company of a friend who hiked with him part of the way. That search was complicated by bad weather. There even was below-freezing nights at the higher elevations.

In the case of Dixon, theft or robbery has been ruled out because his belongings remained in a Tamarindo rented room.

Weather alert continues because some areas remain flooded
By the A.M. Costa Rica staff

Although weather conditions were getting better on the Caribbean coast, the national emergency commission said it was continuing an alert for Limón, Sarapiquí and Turrialba because some communities still were flooded.

The Caribbean and the northern zone have been facing nearly a week of rains, mostly in the mountains. This creates swollen rivers that frequently run out of their banks.

The emergency commission said that Goshen in Matina near Limón Centro was still flooded Monday. Some 85 families there were in public shelters as were six persons in Río Jiménez de Guácimo, said the commission.

The Instituto Meteorológico Nacional predicted sunny skies in much of the country today followed by possible rain in the afternoon. This season is rapidly becoming one without a dry season because the winds from the north that usually
keep the humidity from the oceans in check are weaker than normal. Rain was a possibility in the Central Valley and in the mountains of the central and south Pacific and the Caribbean, the institute said.

The emergency commission was expecting that some of the families would return to their homes later Monday. The agency said that there were weather incidents in six cantons of the Provincia de Limón and also in Turrialba over the weekend. There were slides and flooding, it said. That is why the alert is continuing, it said.

The Comisión Nacional de Prevención de Riesgos y Atención de Emergencias also is keeping its eye on Volcán Turrialba, which has been emitting extra measures of acidic fumes. However, experts from the Red Sismológica Nacional of the Universidad de Costa Rica inspected the mountain and said the status was about the same as last year, said the commission. Experts think that a wall collapsed inside the mountain causing more gas to escape.

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Costa Rican 2010 tourism reported up 11 percent over 2009

By the A.M. Costa Rica staff

The country hosted nearly 1 million Canadian and U.S. tourists in 2010, an 11 percent increase over 2009, according to immigration figures released Monday by the Instituto Costarricense de Turismo.

Visitors from the two northern countries represented less than half of the 2 million tourists Costa Rican officials like to brag about. European figures were not available.

Total tourism rose 9.2 percent in 2010 to 2,099,892, the data said. That brought tourism figures up higher than that registered in 2008, which was a record year with 2,089,174 tourists.

In 2009, 770,129 U.S. citizens arrived as tourists. That number was 830,933 in 2010, There were 83,675 Canadian tourists in 2009 and 119,655 in 2010, according to the data.
A lot of the tourism visas issued by Costa Rica are not to traditional tourists. For example, tourism from Nicaragua is a significant number, although those figures were not released Monday.

The U.N. World Tourism Organization reported Monday that total 2010 tourism was up 6.7 percent over 2009. Growth was strongest in South America at 10 percent, the U.N. agency said.

Carlos Ricardo Benavides, tourism minister here, estimated Monday that Latin American tourism was up between 5 and 6 percent. The U.N. agency did not have figures for Central America.

The Daniel Oduber airport in Liberia handled 225,224 tourists in 2010, some 34,468 more than in 2009, said the tourism institute. That is an increase of 18.1 percent, it added. More statistics are available on the institute's Web site.

World tourism is up nearly 7 percent over 2009, U.N. says

Special to A.M. Costa Rica

International tourism recovered strongly in 2010 according to the advance release of the U.N. World Tourism Barometer. International tourist arrivals were up by almost 7 percent to 935 million, following the 4 percent decline in 2009 – the year hardest hit by the global economic crisis. The vast majority of destinations worldwide posted positive figures, sufficient to offset recent losses or bring them close to this target. However, recovery came at different speeds and was primarily driven by emerging economies.

Boosted by improved economic conditions worldwide, international tourism has recovered faster than expected from the impacts of the global financial crisis and economic recession of late 2008 and 2009. International tourist arrivals were up by 6.7 percent compared to 2009, with positive growth reported in all world regions. Worldwide, the number of international tourist arrivals reached 935 million, up 58 million from 2009 and 22 million more than the pre-crisis peak level of 2008 (913 million).

While all regions posted growth in international tourist arrivals, emerging economies remain the main drivers of this recovery. This multi-speed recovery, lower in advanced economies (+5 percent), faster in emerging ones (+8 percent), is a reflection of the broader global economic situation and is set to dominate 2011 and the foreseeable future, the U.N. agency said.

“The recovery in international tourism is good news, especially for those developing countries that rely on the sector for much-needed revenue and jobs,” said Taleb Rifai, secretary general of the World Tourism Organization. “The challenge now will be to consolidate this growth over the coming years amid a still uncertain global economic environment”.

Asia (+13 percent) was the first region to recover and the
strongest growing region in 2010. International tourist arrivals into Asia reached a new record at 204 million last year, up from 181 million in 2009. Africa (+6 percent to 49 million), the only region to show positive figures in 2009, maintained growth during 2010, benefiting from increasing economic dynamism and the hosting of events such as the soccer World Cup in South Africa. Results returned to double digits in the Middle East (+14 percent to 60 million) where almost all destinations grew by 10 percent or more.

In Europe (+3 percent to 471 million) recovery was slower than in other regions due to the air traffic disruption caused by the eruption of the Eyjafjallajokull volcano and the economic uncertainty affecting the euro zone. However, the sector gained momentum from the second half of the year and some individual countries performed well above the regional average, but this was not sufficient to bring overall results above the losses of 2009.

The Americas (+8 percent to 151 million) rebounded from the decline in 2009 brought on by the economic hardship suffered in North America and the impact of the influenza outbreak. The return to growth in the U.S. economy has helped improve the region’s results as a whole, as did the increasing regional integration in Central and South America and the vitality of Latin American economies. Growth was strongest in South America (+10 percent).

Following a year of global recovery in 2010, growth is expected to continue for the tourism sector in 2011 but at a slower pace. World Tourism forecasts international tourist arrivals to grow at between 4 percent to 5 percent in 2011, a rate slightly above the long-term average.

Persistent high unemployment remains a major concern, with the gradual recovery in employment expected for 2011 still too weak to compensate for the jobs lost during the economic crisis, the organization said.

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San José, Costa Rica, Tuesday, Jan. 18, 2011, Vol. 11, No. 12

Medical vacations in Costa Rica

Human rights groups call
for Baby Doc's prosecution

By the A.M. Costa Rica wire services

Former Haitian dictator Jean-Claude Duvalier, widely known as "Baby Doc," is back in Port-au-Prince nearly 25 years after he was ousted.  Some human rights groups say it is time for him to face charges for abuses committed during his 15-year rule. 

Crowds of supporters cheered for the former dictator late Sunday outside the airport in Port-au-Prince.

But while some Haitians call out Duvalier's name, human-rights groups are calling for his prosecution. 

In a statement from the Haitian capital late Sunday, Amnesty International's Haiti expert, Gerardo Ducos, said it is time for Duvalier to face justice for human-rights abuses committed during the 1970s and 1980s. 

"Amnesty International, jointly with local human rights organizations, have documented serious human-rights violations such as torture, forced disappearances, rape, extra-judicial executions and murders," Ducos said. "The return of Jean-Claude Duvalier represents a clear opportunity for the Haitian authorities to put an end to the impunity that has prevailed for all these human rights violations for nearly a quarter of a century."

Later, Amnesty International and Human Rights Watch each issued statements calling for Duvalier's prosecution, saying justice is long overdue. 

The man known as "Baby Doc" ruled Haiti from the time of his father's death in 1971 until he fled the country in February 1986 after a popular uprising.  The rule of both Duvaliers was characterized by repression and the use of a paramilitary force known as the Tontons Macoutes, which brutally cracked down on the Haitian people.

Duvalier has not publicly explained his reasons for returning to his homeland after nearly 25 years of exile in France.

The former Haitian leader's wife, Veronique Roy, was vague in her answers to reporters when they asked about Duvalier's plans.  

As she made her way through throngs of reporters Sunday, Ms. Roy said nothing had been planned or decided, in an effort to keep things simple.  She also said Duvalier traveled on a diplomatic passport that he has had "for some time."

Another friend and supporter of Duvalier, Henri-Robert Sterlin, said Duvalier is rejoining family, society and the Haitian people. 

While Duvalier's motives are unclear, it is apparent that he has returned to Haiti at a time of political, social and economic turmoil. 

Haiti is dealing with November's disputed elections, last January's massive earthquake that ravaged the capital and killed more than 200,000 people, and an ongoing cholera epidemic that has claimed more than 3,000 lives so far.

Death toll from rains
in Brazil reach 665

By the A.M. Costa Rica wire services

The death toll from devastating flooding and mudslides in Brazil has climbed to at least 665, as the military intensifies its efforts to reach isolated communities near the city of Rio de Janeiro.

Authorities Monday deployed hundreds of emergency personnel to neighborhoods that have been cut off from help by smashed roads and bridges. Heavy rains in recent days sent an avalanche of mud, water and rocks plowing through towns and villages, causing the country's worst natural disaster in decades. The rains dumped the equivalent of a month's precipitation on the affected area in just a few hours. The disaster is the first big challenge to the government of new President Dilma Rousseff, who took power Jan. 1.
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Scientist predicts high levels
of gases and plenty of heat

By the University of Colorado news service

The magnitude of climate change during Earth’s deep past suggests that future temperatures may eventually rise far more than projected if society continues its pace of emitting greenhouse gases, a new analysis concludes. The study, by National Center for Atmospheric Research scientist Jeffrey Kiehl, will appear as a perspectives piece in this week’s issue of the journal Science.

Building on recent research, the study examines the relationship between global temperatures and high levels of carbon dioxide in the atmosphere tens of millions of years ago. It warns that, if carbon dioxide emissions continue at their current rate through the end of this century, atmospheric concentrations of the greenhouse gas will reach levels that last existed about 30 million to 100 million years ago, when global temperatures averaged about 29 degrees Fahrenheit (16 degrees Celsius) above pre-industrial levels.

Kiehl said that global temperatures may gradually rise over the next several centuries or millennia in response to the carbon dioxide. Elevated levels of the greenhouse gas may remain in the atmosphere for tens of thousands of years, according to recent computer model studies of geochemical processes that the study cites.

The study also indicates that the planet’s climate system, over long periods of times, may be at least twice as sensitive to carbon dioxide than currently projected by computer models, which have generally focused on shorter-term warming trends. This is largely because even sophisticated computer models have not yet been able to incorporate critical processes, such as the loss of ice sheets, that take place over centuries or millennia and amplify the initial warming effects of carbon dioxide.

The perspectives article pulls together several recent studies that look at various aspects of the climate system, while adding a mathematical approach by Kiehl to estimate average global temperatures in the distant past. Its analysis of the climate system’s response to elevated levels of carbon dioxide is supported by previous studies that Kiehl cites. The work was funded by the National Science Foundation.

Kiehl focused on a fundamental question: When was the last time Earth’s atmosphere contained as much carbon dioxide as it may by the end of this century?

If society continues on its current pace of increasing the burning of fossil fuels, atmospheric levels of carbon dioxide are expected to reach about 900 to 1,000 parts per million by the end of this century. That compares with current levels of about 390 parts per million, and pre-industrial levels of about 280 parts per million.

Kiehl drew on recently published research that, by analyzing molecular structures in fossilized organic materials, showed that carbon dioxide levels likely reached 900 to 1,000 parts per million about 35 million years ago.

At that time, temperatures worldwide were substantially warmer than at present, especially in polar regions — even though the sun’s energy output was slightly weaker. The high levels of carbon dioxide in the ancient atmosphere kept the tropics at about 9 to 18 degrees F (5-10 degrees C) above present-day temperatures. The polar regions were some 27 to 36 degrees F (15-20 degrees C) above present-day temperatures.

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