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The Government of Costa Rica presents a new fiscal proposal to Congress

The Government of Costa Rica today presented a new fiscal proposal to Congress that seeks to alleviate the deficit and that includes the value added tax (VAT), income tax reforms and a fiscal rule to control current public spending.

San José, Nov 9 (EFE) .- The Government of Costa Rica today presented a new fiscal proposal to Congress that seeks to alleviate the deficit and that includes the value added tax (VAT), reforms to the taxes on income and a fiscal rule to control current public spending.

The government handed over to the heads of congressional benches a new version of the Bill for the Strengthening of Public Finances, in which it raises a VAT of 13%, which replaces the sales tax of the same percentage, but that broadens the base of products and services by tax.

In previous proposals the VAT was 15%.

Whoever collects the tax would deduct the VAT paid to their suppliers, who in turn would deduct what they paid and thus successively throughout the production chain, explained the Government in a statement.

"This would promote the improvement of the competitiveness of local products, by preventing taxes from being charged to the cost of production, and improve the cross-control of the collection of taxes, since the seller must ensure that he can demonstrate what he paid to his suppliers, "says the Government.

The bill also adds a chapter on "Income from Capital and Profits and Losses of Capital", which aims to "regulate everything related to the income generated by the passive income of capital and give a more homogeneous treatment, "says the official statement.

Another point of the initiative is the establishment of a fiscal rule, by which regulates the growth of current spending.

"The fiscal rule is designed so that as the debt-Gross Domestic Product (GDP) ratio increases, the growth restriction of the current expenditure is greater. detailed the Government.

On public salaries, the proposed text on Thursday sets limits to the highest salaries of the Public Administration, regulates the exclusive dedication and converts the payment of annuities into a mechanism for evaluating individual excellence.

The Government assured that this proposal has been built through a process of consultations between various actors and called for it to be considered by the deputies for discussion and eventual approval.

"The fruits of this discussion will begin to see until the second half next year, so it is essential that decisions are made as soon as possible to prevent fiscal problems from worsening, "said Deputy Finance Minister Fernando Rodríguez.

The government of President Luis Guillermo Solís, which will conclude its term on May 8, has promoted in Congress a package of tax laws that have not been processed due to the fact that most parties demand a spending cut before raising taxes.

Costa Rica has been accumulating a fiscal deficit since 2008 and, therefore, it has had to finance current expenses with debt.

The country's fiscal deficit during 2016 was 5.2% of GDP and debt represented 46% of GDP.

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