The Tax Reform Bill (Bill 20.580) which was approved by the Legislature with 34 votes out of 57 was challenged constitutionally because the opponents argued that it needed to pass with a majority of 38 votes. The Constitutional Court of Costa Rica just ruled that the bill can pass the legislature with a “simple majority” meaning that it only needs 29 votes to become law.
Whats Next ?
With this decision it is expected that the Legislature will convene a session to vote on the Tax Reform Bill for a second time and that with a simple majority of 29 votes it will pass and become law.
What to expect
I think it would be safe to say that the tax reform bill will pass in the legislature. The current government has indicated on many occasions that is does not have the funds to meet current financial obligations. Also the lack of a tax reform bill has hurt the ability of Costa Rica to borrow funds from foreign sources.
The Supreme Court did take into account the analysis of the Central Bank about the financial crisis in Costa Rica as part of its decision. Currently the financial deficit of Costa Rica is the worst that is has been in 35 years and the government has advised that it was struggling to meet payroll obligations and had to borrow funds from the Central Bank to cover year end payroll obligations.
