Costa Rica officials learn
from tax policy in Europe

Dear A.M. Costa Rica:

It seems that the government is slowly catching up with taxes that are common in other parts of the world.

In Germany we don't have the luxury tax on certain houses. Therefore every property pays a certain tax every year, be it for living quarters, industrial or agriculture.

Apart from that, every sale of a property is taxed with 2,5 or 3,5 percent of the value of the notarial document (depending on the county/state where the property is situated).

The government seems to be comparing its tax system with other countries, especially Europe, where nearly everything is multiply taxed. And it is learning quick. And you can rest assured that the taxes well known in other countries will in time also appear here!



Not much likely to come
from fiscal reform  push

Dear A.M. Costa Rica:
 
Last Friday, there were a couple of good articles on Costa Rican taxes: one reflecting an ignorant and impractical as always mentality, and the other one showing some common sense creeping in. And bear in mind this is after the IRS has had several agents stationed for months in the country advising the Costa Rican authorities how to collect taxes as done in the U.S. Surely the topics of thumb screws, the rack and jail time were discussed, none of which is known in this little Latin country.

Of course, there is never open debate in government as to why there is such a high degree of tax evasion in Latin American, unless the answer is thought to be known beforehand: all Latins are non-civic and have no trust in their governments, and do whatever they can not to pay.  In no way, I am implying that others in other countries are happy to pay taxes, but there is a psychological factor called when it comes to paying: feeling you are getting your money’s worth. In Costa Rica, the taxpayer is definitely not, so he therefore feels screwed, thus avoids paying taxes whenever he can by looking for loopholes in the tax laws, which are probably left there by the legislators writing the tax to benefit their special interest friends and themselves, or simple assuming that the collection system is so deficient that by the time his non-payment is discovered, the statute of limitations has expired, which it does after three years on property taxes you pay at your local municipality.

I find this a rare situation taking place in Costa Rica: all of a sudden discovering the need for a huge amount of new tax revenue. Of course, Doña Laura did promise a lot during the campaign, and all those promises cost money, especially keeping us safe from the bad guys, which ain’t gonna happen, and did not realize the cupboard left by Dr. Arias was bare. Remember, it was during Oscar Arias’s administration that there was a budget surplus, the only one I can remember in all the year’s I have been here. Maybe Dr. Arias’ government did a lot of scrimping and saving to get that surplus, so it could go into its last two years on a spending binge, having lots of projects to inaugurate with plaques bearing the Arias name, so that brother Rodrigo, former White House Chief of Staff, now running for president in 2014, can say, “See what my brother and I did for the country. Let me do it again. Laura tried but was not up the task.”

For whatever it is worth, my view is that little will come out the finance committee to be voted on the floor in the tax bill. “Tax packages” have been presented before over the decades, and only small portions got passed. Some minor adjustments will be made, but nothing to halt private investments or drive off new pensionados.

Yes, I am aware Tico legislators do pass some stupid laws, but they know that it is harmful to their political health to make their voters pay more to a corrupt and inefficient government of their own making. Somewhere, hopefully, there is a moral question involved, as well. Kinda doubt it though.

My suggestion to those who might owe the luxury tax on your house is to go the national tax office and talk with people there. They are very helpful, or contact a reputable appraiser. The tax office has patience with those who are willing to find out if they owe. I know from the experience.  But if you hide from them, they will find you, and quite simply, by going to the municipal tax records. And there you, bared naked, photos and all, and then they will sock it to you 10 times. The new tax office director may sound nice, but he has his marching orders, which tomorrow might be a pit bull, after a phone call from his frustrated boss.