About the Solidarity Tax
This afternoon, the Costa Rican government proposed applying a “solidarity tax.”
The President of the Republic, Carlos Alvarado, commented that other measures and resources available to the government will be exhausted first, so the measure would be implemented only “if necessary.”
Under the proposal, a mandatory contribution would be imposed on any salary equal to or greater than one million colones (around $1,731 USD based on today’s exchange rate). Although there is no clarity on how the tax would be applied, the Minister of Finance indicated that its application would be staggered, so people with higher incomes will be taxed at a higher percentage, and will be deducted from all public and private sector workers’ salaries.
The tax base has not yet been defined, however, it is estimated that the measure will raise up to ¢25,000 million colones per month.
The aim of the tax is to support people who have lost their jobs or who have been affected by the economic damage caused by the COVID-19 pandemic.
Before launching the plan, Carlos Alvarado indicated that the tax would be a last resort, after exhausting all other measures such as access to international credits, the redirection of resources from institutions, the use of an extraordinary budget, and the fixing of fuel prices (taking advantage of the fall in the price of crude oil worldwide).
We will be providing details on how this initiative will operate as long as there is legal certainty about the measures.
