A three-month moratorium on the payment of value-added taxes, business income and customs duties, a significant reduction in the monetary policy rate to reduce credit and insurance so that the tourism sector can face quarantines due to the Coronavirus (COVID -19), are the first financial measures announced to face the effects of COVID-19.
“COVID 19 is testing us as a society. For this reason, we want to give Costa Ricans the absolute certainty that, as an economic team, we will use all the tools available to us to give relief to the cash flow of households and companies, prevent the destruction of employment and ensure the availability of resources. for optimal health care for people ”, explained María del Pilar Garrido Gonzalo, head of the Ministry of National Planning and Economic Policy.
The MIDEPLAN hierarchy stated that COVID-19 must be understood as a public health challenge and that it will have important repercussions in the global economy. “For this reason, the President has instructed the Economic Council to provide an immediate and coordinated response to anticipate and mitigate the socioeconomic effect of the pandemic,” said Garrido.
President Carlos Alvarado said that “the objective of this first phase of care and financial support measures is to relieve those small and medium-sized entrepreneurs and protect working people, who are affected by the impact of COVID-19.”
These proposals were presented this Saturday afternoon at a press conference by President Alvarado and the Government’s Economic Team headed by the coordinator and minister María del Pilar Garrido Gonzalo; Finance Minister Rodrigo Chaves; the president of the Central Bank of Costa Rica, Rodrigo Cubero; the Minister of Tourism, María Amalia Revelo; the Minister of Agriculture and Livestock, Renato Alvarado; the Minister for Coordination with the Private Sector, André Garnier; the Minister of Economy, Industry and Commerce Victoria Hernández and the Minister of Labor, Geannina Dinarte.
Measures for employment protection
The President of the Republic has urged the Executive President and the Board of Directors of the CCSS to implement the necessary and temporary measures to mitigate the economic and employment effect of COVID-19. To this end, the President of the Republic is convening on Monday the Board of the CCSS so that within the framework of his autonomy, the pertinent measures will be quickly specified and implemented.
This means that the social charges would be made proportional to the time actually worked. In addition, it will request to consider the deferred payment of social charges. Both measures would be visualized for those companies that maintain their payroll, in such a way that employment is protected.
To this end, Alvarado will convene a meeting on Monday, March 16 with the Board of the CCSS, so that these measures will soon be specified and implemented and to learn about other initiatives of the entity.
Relief in the cost of credit
The President of the Central Bank, Rodrigo Cubero, has informed the President of the Republic that the Central Bank and the National Council for the Supervision of the Financial System (CONASSIF) will evaluate actions aimed at improving credit conditions for Costa Rican households and companies. In particular:
- The Board of Directors of the Central Bank will consider the possibility of an additional monetary stimulus to continue pushing down interest rates.
- CONASSIF will consider temporary adjustments to the prudential regulations in order to expand the space for the re-adjustment of credits, so that banks can reduce the credit service fees of their debtors.
- CONASSIF will also assess the temporary reduction of countercyclical provisions, to allow a greater expansion of credit at this juncture.
Likewise, through a directive, the President of the Republic will instruct the state’s commercial banks to readjust debtor loans, including a possible moratorium on the payment of principal and / or interest for three extendable months, particularly for most affected sectors.
Relief on tax obligations
The Ministry of Finance will present a bill to authorize a tax moratorium; that is, a postponement in the payment of income taxes, VAT and customs duties of companies and SMEs for a period of three months from the entry into force of the law. The amounts of the taxes corresponding to that period will have to be paid by the taxpayers before December 31, without interest or fines.
Depending on the impact of the pandemic on the economy, the law would authorize the President of the Republic to extend the moratorium only once for a month. The measure does not exempt taxpayers from any other tax obligation.
Relief in insurance payments and special coverage for tourists
The Executive President and the Board of Directors of the National Insurance Institute (INS) will propose to the Superintendency of Insurance:
- A preferential rate for occupational risk insurance for companies with less than 30 workers. The amount to be paid, as a proportion of the full premium, would be applied as follows: 40% in year 1.60% in year 2 and 75% from year 3.
- A new definition so that the work risk accident rate that may derive from the COVID-19 is not attributed to individually considered companies but to the entire line.
- A new product to help the tourism sector to cope with the contingencies caused by COVID-19. It is a quarantine insurance for tourists who come to the country.
In the coming days, more measures will be announced to protect the income and jobs of Costa Ricans so that they are not disproportionately affected and to avoid the permanent effect of this crisis. Furthermore, it will seek to guarantee that the liquidity of our financial sector can continue to provide adequate support to the economy.