Costa Rica Is Declared a Tax Haven. What Does this Mean?

Costa Rica, one of the leading countries worldwide for choosing not to have Military Forces to protect its territory in the middle of a complex region such as Latin America, is a symbol of admiration and transparency. However, with the news that the European Union has included this country in the list of tax havens, its image has been affected to the point of creating uncertainty about its national economy.

Earlier this week, the Council of Europe released the most recent list of countries that are considered tax havens, and for this edition Costa Rica entered this sorry group along with the British Virgin Islands, the Marshall Islands and Russia. Counting these four countries, there are 16 in total that are marked by the European Union, most of them from the Caribbean, which includes the neighbor, Panama.

The Costa Rican government did not delay in issuing a statement in which it assures that the fault for the country being on this list comes from the previous government that did not comply with the mandates of the European organization so that the Central American nation came out well qualified. Despite this, President Rodrigo Chaves assured that work is being done on a bill that will be presented in March to prevent this type of situation.

What Led Costa Rica to Be Classified As a Tax Haven?

The European Union maintains a strict protocol to determine which territory could be a potential tax haven, as well as being an international organization where impartiality must be its cover letter. For this reason, the Central American country "by not fulfilling its commitments to abolish or modify the harmful aspects of its foreign source income exemption regime," was the reason why it was included on this list, shared the economic newspaper La Información.

In other words, Costa Rica does not have an adequate tax burden for foreign investments, it is considered a nation with unfair competition against others. Therefore, there is a risk factor for the economy in general, since this is often chained to false financial information supplied to international tax organizations.

With the entry of Costa Rica to this list not welcome, foreign investment and exports could begin to be affected by this statement from the European Council.

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What Is Coming for Costa Rica Amid the Amazement

The Costa Rican government has been pragmatic in complying with the statement and beginning to look for solutions to get out of this situation as soon as possible.

According to the Semanario Universidad, the Executive continues to establish rapprochements with the European organization. The purpose is to demonstrate that the State will not let the situation take advantage of it, and it is expected that a bill will be ready by March that allows more rigor in the matter of foreign investment. From the presidency, it was also added that it is expected that in October of this year it will be possible to get out of this grey list through an action plan that has the established Code of Conduct as its central axis.

The Minister of Finance of Costa Rica, Nogui Acosta, has expressed that the European Union knows that the Central American nation is willing to adapt all the actions that are necessary to establish the appropriate taxes. This is how it is intended to overcome this situation that will not be favorable for the Costa Rican economy. As long as it continues to be considered a tax haven, negative situations such as the drop in exports can arise, the Chamber of Exporters pointed out to La República.

For her part, the Swedish Finance Minister, Elisabeth Svantesson, has invited the countries that are on the grey list, officially known as the "List of non-cooperative jurisdictions for tax purposes", to improve each other's legal framework and work to comply with international tax standards. Svantesson ended by congratulating Barbados, Jamaica, North Macedonia and Uruguay for meeting these standards, earning them the right to be removed from the pitiful list.

The nation that has been dubbed 'The Switzerland of Central America' is slowly on its way to becoming like its neighbor Panama if it does not control its permissive laws on foreign investment. Its northern border with Nicaragua does not contribute much to improve the areas of coexistence due to the civil and political crisis that Managua is experiencing. Even so, Costa Rica has maintained its purpose of being a peaceful society in the midst of a region highly marked by conflict within and between nations. The inclusion on the grey list could be considered as a small stone in the shoe, which with a shake can be overcome in the middle of its long democratic walk.