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Costa Rican COVID-19 economic measures: Tax moratorium and price regulation
On Saturday, March 28, 2020, the Government of Costa Rica announced a five-step plan to combat the effects of the COVID-19 pandemic on the country’s economy.
This is “a first installment” of executive actions to avoid devastating effects of the coronavirus crisis on the national economy, which has already faced distinct challenges over the last several years.
Among the Costa Rican COVID-19, economic measures that have been taken is a 3-month moratorium on the payment of Value Added Tax (VAT). Also, payment of Income Tax and Customs Tariffs for companies has been suspended for three months, extendable to a fourth month.
Additionally, the regulation of the price of alcohol in gel has been implemented, as has the price of liquid disinfectants, spray disinfectants and bar or liquid soaps, disinfectant towels, as well as goods that are indispensable during the current emergency situation caused by COVID-19.
In addition to the aforementioned actions, following a March 16, 2020 meeting, the Banco Central de Costa Rica’s board agreed to reduce its monetary policy rate to 1.25% from 2.25%. It also lowered its rate on both overnight deposits and its permanent deposit facility to near-zero.
On Monday, March 30, 2020, the President of the Republic, Carlos Alvarado, met with the Board of Directors of the Costa Rican Social Security Fund (CCSS) to request that the institution authorize the collection of social charges for the time actually worked, in addition to a request to approve the deferred payment of social burdens and other measures that allow the private sector to maintain its fiscal health.
Specific Costa Rican COVID-19 economic measures
For his part, Rodrigo Cubero reported that the Central Bank of Costa Rica and the National Council for the Supervision of the Financial System (Conassif) will take actions aimed at improving the terms of credit for households and Costa Rican businesses. More specifically:
- The Central Bank’s Board of Directors will consider the possibility of an additional monetary stimulus to further push down interest rates.
- Conassif will consider temporary adjustments to its regulations in order to expand the space for reinstatement of credits so that banks can reduce their debtors’ service fees.
- Conassif will also assess the implementation of temporary reduction measures to allow for further expansion of lines of credit during the current pandemic.
- Similarly, by guideline, the President of the Republic will instruct the nation’s commercial banks to readily re-read debtors’ loans, including a possible moratorium on the payment of the principal and/or interest for three months in the sectors that are most affected by the current economic downturn.
- Finally, the Executive Chairman and The Board of Directors of the National Insurance Institute (INS) will propose to the Superintendent of Insurance:
A preferential rate for occupational risk insurance for companies with fewer than 30 workers. The amount payable, as a proportion of the full premium, would apply as follows: 40% of year one; 60% for year two; 75% from year 3.
Additionally, among the Costa Rican COVID-19 economic measures recently taken has been the development of a new product that is being offered to help the tourism sector cope with current challenges. It is quarantine insurance for tourists coming to the country.
More measures will be announced in the coming days to protect the incomes and jobs of Costa Ricans so that they are not disproportionately affected by the current crisis, as well as to avoid the permanent pejorative effects of the pandemic on the Costa Rican economy. In addition to this, the Costa Rican Government will seek to ensure that financial sector liquidity can continue to provide adequate support for the country’s economy.
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