Expats will have a surprise when their names will be published in El Financiero, the weekly business newspaper for not paying sales tax
Sometime next week Expats that have not paid sales tax (or other taxes) may find themselves in an embarrassing situation; this is when their names will be published in El Financiero, the weekly business newspaper put out by Grupo Nación.
Currently there are 1000s of Expats who own small businesses that vary from B & Bs, eco-tourism, gift shops, online sales, travel agents, real estate etc. Costa Rica is a haven for expats and the government allows foreigners to own business and work in the country, so long as they follow regulations and conduct business ethically. Usually a business has to be register with Caja Costarricense de Seguro Social (CCSS, Social Security Institution), with the National Insurance Institute (Instituto Nacional de Seguros) and record deeds of the incorporation charter (if your business is a SA, which is highly recommended) before the Mercantile Section of the Public Registry.
And of course pay sales tax, which many do or have not in this case. The current sales tax is around 13% the amount paid for goods and for some services. Professionals like lawyers, doctors, dentists and other independent professionals are exempt from sales tax.
This whole thing started when a reporter tried to get a list of those individuals and businesses that owe the country money. But the Dirección General de Tributación (Costa Rica Tax Collector) rejected his requests, so the reporter took it to the Sala IV constitutional court and won.
The court said that the information sought was of public interest in that the income to the Ministerio de Hacienda and delayed payments affect the public. Public access to information of public importance is guaranteed by Articulo 30 of the Costa Rican Constitution, the court also noted.
In other words, Sala IV ordered the Directorate General of Taxation (DGT), Ministry of Finance to deliver these defaulters weekly reports to El Financiero for three different taxes (VAT, luxury homes and rent) and for those that are in default to have those names published.
Sala IV also did a press release, letting all those that were in default know the ruling of the courts – that public access to information is of public interest (Article 30 of the Constitution) and that they are pushing to ensure relevant principles such as social control, participation and accountability.
Obviously this has caused quiet a stir. Many Expats are crying and some have even claimed they are being ruthlessly targeted. One was quoted as saying “Too bad we live in a country awash in both morbidity and poles and social malcontents.”
Others have cheered the ruling with comments, like “Whoever opposes this publication is to be investigated,” and, “What a excellent idea.”
Like the US IRS, the Tributación Directa is someone who you do nto want to play around with. Per Articles 90 and 92 of the Code of Tax Norms and Procedures established jail terms for tax offenders. However, like the US, there are not that many people in jail for tax invasion or fraud. However, Costa Rica is getting better every day (with the help of the US IRS) at collecting its taxes and prosecuting those who do not pay.
What do you mean by embarrassing? I’d love to live in the country where tax evasion is “punished” merely by having one’s name published in a newspaper. It’s much better than paying heavy fines or going to jail, don’t you think?