In Costa Rica the Law to Strengthen the Public Finances will be discussed and analyzed by the Legislative Assembly as of next Monday, this project proposes going from the current 13% sales tax to a 13% value added tax (VAT) in most services.

With this change services that currently don’t pay taxes will now have to pay it, that is the case for instance of gyms and services offered by independent professionals.

The project also makes exceptions, as is the case of private health and education that would be taxed a 4% and the purchase of articles for packaging and raw materials, as well as services used for the production of agricultural products, aquaculture and fishing, among others which would be charged only a 2%.

The current income tax charged over high salaries would also be modified and would now be as follows: salaries between ¢1,199,000 and up to ¢2,103,000 (approx. $2110.00 to $3,701.00) would pay 15% income tax; salaries between ¢2,103,000 and up to ¢4,205,00 would have to pay 20%; and amounts over ¢4,205, 000 a month would be charged a 25%.

Online services such as Netflix and purchases made outside of the country will also be taxed.

Modifications also include the establishment of a limit of 1.94% of the base salary for the additional payment received by public employees per year worked (known as anualidades), this percentage used to be higher than 5% in some institutions and constitutes the most expensive incentive for the public administration.

The pension amounts received by ex-presidents would be reduced considerably.

Parts of the project are still being checked by the Treasury Department and the Legislative Commission as it leaves certain things open for interpretation and confusion which at the end could affect the contributors.

This project expects to reduce the fiscal deficit in close to 2 points of the GNP which is currently of over 6%.

The bill still has a long way ahead before a final version is approved, it is unlikely that this will happen before the new government takes over.