Costa Rica Should Copy El Salvador and Remove Taxes or Obstacles to the Technological Sector, according to Experts

    NayibBukele proposed eliminating all taxes on technological innovations, equipment and software so that El Salvador remains competitive to foreign investment

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    In order to remain a competitive country in terms of attracting foreign investment in the technological area, Costa Rica should rethink its strategies and copy the good things that other countries like El Salvador do, according to experts consulted.

    The possibility that companies in the technology sector located in different parts of Latin America, including Costa Rica, consider settling in that Central American nation after the intention of the president, Nayib Bukele, to remove all tax burdens on this type of companies, devices and services related to technology, should generate an alert to Tico authorities.

    And it is that, in the face of more aggressive competition for foreign investment, the State must take action on the matter to protect thousands of current and future jobs. At the same time, it is urgent to resolve the unsatisfactory demand in the local market in STEM areas, involve more women in the study of engineering and computing, and facilitate access to electronic devices for all social strata.

    Obviously, decisive progress must also be made in the entry of the 5G network, AI and the Internet of Things, among other technologies. “Costa Rica must think about where its industrial growth will point, given that being a sustainable country that does not consider other business models such as mining, and when it reaches the limit in terms of spaces for agricultural production, our bet must undoubtedly be the technology and services sector”, indicated Mónica Segnini, president of the Council for the Promotion of Competitiveness.

    Privileged indicators at the regional level

    Precisely our country has privileged indicators at the regional level in terms of attracting foreign investment in this area, since 16% of the main technology companies in the world have chosen our country to install their operations, according to data from the Costa Rican Coalition of Development Initiatives (Cinde). However, this should not be a reason to lower one’s guard, but rather, given the actions announced by the Cuscatleco government, one should continue with the line of eliminating obstacles, as President Rodrigo Chaves himself has stated on various occasions.

    “I am pleased that El Salvador has gone one step further in exempting this sector from taxes, while Costa Rica is lagging behind in the vision it wants to achieve at a technological level and in the position it had before”, said Congresswoman Johana Obando, promoter of the bill to reduce VAT to 1% for Internet services. Any initiative to promote exemptions must pursue a balance between the promotion of the benefited sector and the fiscal well-being of the country, while what companies can “save” in taxes can be used to enable more jobs based on their growth, added Alberto Porras, from the firm Baker Tilly.

    In El Salvador, the positions are divided regarding this new proposal, since it would only benefit transnational companies and would not take into account SMEs that develop applications or other software solutions, although otherwise it is viewed favorably, commented to La Republication Carlos Mejía, journalist for El Diario de Hoy, in that Central American country. The intention of Salvadoran President Nayib Bukele to exempt companies in the technology sector from taxes in that country can generate benefits for attracting technology investments, but it is not the only element to be considered by companies.

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