- Category: The Nation
- Published on Friday, March 16 2012 05:08
- Written by Rod Hughes
- Hits: 411
The long awaited, much maligned tax reform bill passed its first vote Wednesday evening but must wait for the Constitutional chamber (Sala IV) of the Surpreme Court before being voted upon the final time.
The final version, a creation of the Chinchilla Administration altered by modifications stemming from the President's talks with Citizen Action Party (PAC) chief Otton Solis, ( see previous articles) passed by a comfortable 31-19 margin.
The bill was a major issue for the Administration, intended to bring more revenue for the government in the face of deficits of more than 5% of the GNP. Many feared that the gap between income and spending would bring the country into the same plight as Greece experiences.
Although President Laura Chinchilla had counted on PAC support after the compromise changes, the vote did not quite go as she had hoped. She got all 22 votes from her National Liberation Party lawmakers but only eight from PAC and one from National Restoration deputy Carlos Avendano.
It was enough, however, to result in the bill's passage. Although the Sala IV can send the deputies back to the drawing board by declaring the measure unconstitutional, the bill fared better than the last tax reform. That bill took nearly the four-year term of President Abel Pacheco (2002-06). After the congressional session was over, the court struck it down.
The measure will not wholly close the budget gap but will reduce it of a more comfortable debt, reducing about 1.5% of the GNP (35 billion colones) and giving the government more breathing space.
Some of the measures to do that include new ad valorum taxes, some income tax changes and changes in the sales tax. One of the most controversial measures was a tax on foreign companies in previously free zones, opposed by business fearing it will brake foreign investment.
As expected, eight deputies of the far right Libertarian Movement voted against the bill as well as four each from the center-right Social Christian Unity party and the far left PASE Party, two from PAC and a Wide Front deputy. Four lawmakers were absent and probably would have voted no.
Social Christian Unity Deputy, Luis Fishman, filed an appeal for court review which could take up to 18 months. this would likely kill the bill if the Sala IV rules it unconstitutional. There would simply not be enough time to alter the bill and eliminate or change the objectionable paragraphs before the current session runs out.
Business will undoubtedly view the law -- if Sala IV declares it in accord with the constitution -- with mixed feelings. Although business people do not like some parts, Administration officials have warned of the depressing effect of continued high budget deficits on the economy.