Government proposes to reduce VAT tax on medicines by two percent
Costa Rica
1 agosto 2018

The Finance Ministry  introduced a document to the National Assembly this month so that deputies could incorporate it into the tax reform bill. In this version, the Executive branch proposes to halve the Value Added Tax (VAT) on medicines from 4% to 2%. The government’s initiative seeks to resolve the State’s deficit situation through a tax reform that creates the Value Added Tax (VAT) and defines the sectors that will be obliged to pay the tax. In Chile and Colombia, the Executive branches are also analyzing the possibility of modifying taxes on medicines; if these proposals advance, they will be introduced as bills to their respective Congresses.

The modification proposed by the Executive is subject to the deputies’ approval and the government has not presented reasons to implement it. However, estimates indicate that the consequence of these changes would be a loss of approximately US$29 million in tax, and Finance Minister Rocío Aguilar said that the document does not include compensation mechanisms to ensure the performance of the tax reform.

Legislators members of opposition political parties expressed their dissatisfaction with the strategy chosen by the government to introduce this alternative. Therefore, the committee in charge of discussing the tax reform bill decided to wait until next week to meet again as well as to enable a second day to introduce modifications to the bill.