SAN JOSE, Costa Rica, (Reuters) – Costa Rica’s highest court has rejected an ambitious fiscal reform bill proposed by President Laura Chinchilla to bring the country’s ballooning budget deficit under control.
A panel of seven judges in the Supreme Court of Justice unanimously ruled that the manner in which the fiscal bill passed through congress was unconstitutional, the court said in a statement yesterday.
The ruling followed a challenge to the draft legislation by an opposition lawmaker.
The court said that amendments made to the bill to get it through the national assembly amounted to short cuts that were in breach of the constitution. The ruling means the plan will likely be sent back to congress, where Chinchilla’s centrist National Liberation Party lacks a majority. Among other measures, the proposed law aims to raise tax revenue by the equivalent of 1.5 percentage points of gross domestic product (GDP) and reduce the deficit, which has swollen to more than 5 percent of GDP. It also planned to impose a 15 percent tax on companies working in the country’s tax-free zones after 2015.
Chinchilla’s administration is expected to try to get the bill passed again, but chances of succeeding before the term ends in May 2014 are slim, said member of congress Otton Solis, who leads the opposition Citizens Action Party and supports the bill.
“The difficulty now is that the only way to pass a tax reform is through a quick route legal mechanism, which requires an initial support from two-thirds of Congress. This was very difficult to obtain the first time and I think it’s impossible now,” he said.
