The Value Added Tax (VAT), which is discussed in the Legislative Assembly, will generate a significant increase in all products that are currently exempt from the payment of sales tax, such as those included in the basic basket.
This was stated by José Manuel Hernando, president of the Costa Rican Chamber of the Food Industry (CACIA), who asked legislators not to approve the bill to strengthen public finances promoted by the Executive Power.
According to Hernando, the VAT proposal will eliminate the tax credit – which can now be applied by the producers of goods included in the basic basket – on the tax on the acquisition of raw materials, packaging, ingredients, machinery, equipment, packaging and other supplies used in the production of exempt goods.
“The elimination of this tax credit is equal to dismantling the basic basket concept, not through the exempt rate in the final good, but through the payment of the value-added tax on production. Therefore, those who indicate that there is no impact on socially disadvantaged sectors will be deceiving the population,” said Hernando, who added that there will be two kinds of consequences:
• An increase in the production costs of the basic basket, which will be absorbed by the final consumer via the price of food.
• The imported products that compete with the nationals of the basic basket do not have that tax distortion, so national producers will be at a competitive disadvantage.
Hernando maintained that this problem had already been solved with the modification to the General Law of the Sales Tax, which had clearly established the rules of the game in this matter.
He said that these were accepted at the time by regulators, productive sectors and the Ministry of Finance.