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Tax evasion estimated at more than 70 percent but declining Feb. 5, 2010  AMCostarica.com

 The Contraloría de la República estimated that the country lost out on the bulk of the taxes residents were supposed to pay from 1991 to 2007. A study released Thursday said that the rate of tax evasion was estimated at from 72 to 73 percent in the period from 1991 to 1993 and spiked to 79 percent in 1995.

 

The Contraloría estimated the amount of taxes that should have been paid by estimating the gross national product and then comparing the taxes that should have been generated with the taxes actually paid.

However, the Contraloría, the national's financial watchdog, said that evasion declined to 70 percent in 2006 and to 64.3 percent in 2007. 

The study credited tighter controls and methods like the fiscal lottery. In the lottery citizens were asked to submit facturas or invoices from various companies, and winners of prizes were selected among the submitters by chance. But then the Tributación General would study the submitted facturas and go after those merchants who were not reporting their sales or other economic activity.

 Costa Rica has an extensive system of reporting in which both those paying for goods and services as well as those selling goods and services have to submit reports. The reports used to be annual, but this year Tributación has said it will require quarterly reports.  

So a taxpayer who goes to the dentist is supposed to file a report on the money paid for treatment. Tributación will match that against the income statements submitted by the dentist.

The Contraloría said that evasion cannot be reduced to zero, but in Costa Rica the amount withheld by taxpayers is high compared to the national economy. 

The study also showed that the average gross profit of businesses ranged from 21 percent to 17 percent from 2004 to 2007.

Tributación has been working with the U.S. Internal Revenue Service to increase the efficiency of collection.

The study did not address evasion of sales tax, which also is rampant.