The controversial tax reform, which urges the Government of Costa Rica to consolidate public finances gave today a key step toward final approval in Congress. The Constitutional court gave for good in the legislative procedure that led to the October 5, a first favorable vote for the project, despite the opposition of sectors of state workers that still stand, the largest strike in a century in this central american country used to a high social welfare.
In a rare press conference, at 23.00 hours on Friday, president Carlos Alvarado welcomed the decision: “we Now have the possibility of a second debate, to open a stage of economic stability (…) Is a very important step for the generation and the future generations. I’m excited”. To his side, the minister Aguilar repeated that the immediate effect is more important will be the confidence they may feel investors. It is expected to give final vote on this last week of the month of November.
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With a unanimous vote of the judges of the high court left the point of ratification of a tax reform considered by the authorities as “essential” to avoid growing fiscal deficit (7% of GDP) and the debt of the central Government (54% of GDP). Unlike what happened in 2006 and 2011 with two tax reforms are frustrated in the Constitutional court, on this occasion the proposal is on track to become law in the Legislative Assembly, where there is a majority support reflected in the vote initial of October 5, 35 votes against 22.
With the guarantee of constitutional it is expected that next week the pro-government representatives and allies of the opposition to ratify the reform and launch a sign of relief to the financial markets, as intended by the Ministry of Finance and the Central Bank. The objective of the Government of Carlos Alvarado is that this step to generate more confidence in financiers and reduce the pressure on the exchange rate, interest rates, and inflation indicators that have been altered in the last month, in the midst of a climate Cratosslot of uncertainty and pessimism for the consumption and the investment.
The fiscal reform would bring to the Government in the first year slightly more than 400,000 million ($660 million), an amount that is equivalent only to 1.5% of GDP and that is insufficient to balance the finances, but it is essential to give positive signals to the markets suspicious, according to the Treasury and independent economists. So you can pick up new financing for the deal in December, payment of wages, bonuses and loans, among others. Could be in the 2019 to avoid clipping the investment that characterizes this country indices of well-being above the average for Latin America.
The project attorney is in essence an extension of the taxpayers subject to the sales tax (13%) and the increase in income taxes, in addition to caps state spending and benefits wage that receives a part of the public workers.
The attempt to limit the benefits of state employees (in excess of that enjoyed by the private sector) was one of the triggers of the strike that began on 10 September with strong effects on the provision of services and that fulfilled this Friday, his day 74. It is now the strike is more extensive since the late NINETEENTH century, although the majority of unions have given a step to the side, and the resistance is given on all groups of teachers. Thousands of students have been left without the possibility of conclusion of their school year. It seems unlikely the return of educators to the classroom now that the fiscal plan is on the verge of approval.
Alvarado (a young-of-speech progressive 38-year-old that took power just six months after the elections are haphazard) and his Finance minister, Rocío Aguilar (a lawyer close to financial tasks that inspire confidence in entrepreneurs), insist that the tax reform is the first step to fix an imbalance that has grown over almost two decades. Compare it with a medication because of unpleasant and necessary. If not taken, it would be impossible for Costa Rica to maintain state benefits for the families of less resources and to avoid that the figure of poverty is greater than the 21% current, referred to the authorities as part of a strong information campaign has been driven to promote the project fiscal. The negative opinions about the Executive, however, increased from 42% to 55% in two months, according to a survey of the University of Costa Rica (UCR), published last Wednesday.
