In an effort to reduce an increasing federal deficit, Costa Rica’s President Laura Chinchilla has pushed for a tax hike, all the while without knowing that allegedly several of her staff members were not paying their own taxes.
The head of direct taxation, Francisco Villalobos, resigned this week from his position after paying thousands of dollars in unpaid income tax, while his boss, Fernando Herrero, the finance minister, unwillingly resigned after “La Nación” the daily newspaper revealed his tax evasions on two separate properties. His wife, a presidential advisor, was also involved in the tax evasion as she is listed as an owner of each property. The newspaper also alleges that several more cabinet members who have yet to come forward are also guilty of the same crime.
The scandal will greatly affect the President’s tax reform efforts. It is believed that Costa Rica is already over priced for its region and after the downfall of many top government officials the tax hike will be a hard sell. The plan has already been approved by legislators in a first vote yet still needs support from the opposing party, Citizen’s Action Party. Costa Rica’s vice president, Luis Liberman, has reportedly taken over the finance ministry temporarily as a result of the recent and possibly future resignations within the department.