On Monday, the Costa Rican Congress approved a fiscal plan which witnessed widespread protests from various unions all over the country for over two months. The plan, named Law of Public Finances (Exp. 20580), was approved by 34 deputies from various political groups.
The green light for the vote in parliament was provided when the Constitutional Court ruled Nov. 23 that President Carlos Alvarado Quesada's fiscal plan is not unconstitutional.
Deputies of the ruling Partido Acción Ciudadana (Citizen's Action Party, or PAC) said that this "vitally important process contributing solutions to the financial stability of the state" was able to be concluded by "through dialogue and reaching agreements between various political forces."
In October, the court had previously halted the fiscal plans amidst growing protests and strikes.
The president wrote on Facebook, “At this time I sign the law on strengthening public finances. I thank those who have supported the government of the republic in this effort, especially the deputies and members who managed to agree, to make it happen.”
The main purpose of the tax reform is to a make the sales tax into 13 percent Value Added Tax (VAT) on certain goods and services, and will also increase the number of taxed products and services.
Additionally, the legislation seeks to make adjustments to income tax payments and plans to reduce public spending by limiting wages and other benefits paid to public workers.
President Alvarado, who was elected in April, is hoping to use the reforms as a signal to international investors that the country is open for business, thereby stabilizing its finances, reducing its fiscal deficit, and limited the growth of debt.
Deputy Jose Maria Villalta from the Frente Amplio (Broad Front) party criticized the vote, saying that "it eliminated the constitutional requirement of a supermajority (38 votes) to vote on this bill," yet the voting went ahead due to the Constitutional Court ruling.
"But the fight for fiscal and tax justice in our country will continue even if this project has been approved. I want to recognize today in this Plenary session, that all those people who throughout these weeks have fought for a fair tax reform in our country, I want to recognize those struggles that have taken place for many days," said Villalta.
According to Deputy Walter Muñoz, “far from generating economic reactivation and strengthening of finances, in the end, what it is going to produce is more poverty in this country.”