The comments of the Organization for Economic Cooperation and Development (OECD) at the 2012 Forum in Paris were somber:

“The reports from Costa Rica [and other countries] will not move to the next phase of review due to the grave deficiencies in their legislative frameworks.”

The other Latin American countries mentioned were Guatemala, Panama and Uruguay.  In the Caribbean, Barbados had failed back in 2010, but the Forum considered that the island nation had achieved significant progress. With that statement from the OECD, Costa Rica joins a list of other countries with fiscal legislations that do not conform to fiscal transparency standards, including Switzerland and Antigua.

A headline in La Nacion stated that Costa Rica had flunked the OECD exam. Brazil, Mexico and Chile advanced to the next review phase.

The results at the OECD Forum come just days after the World Bank Doing Business report indicated that Costa Rica’s improved tax compliance of the last few years moved our country up in their list of sovereign jurisdictions with uncomplicated tax compliance procedures.

The peer reviews conducted by the OECD determined that our national laws do not allow sufficient transparency and international exchange of tax information. This is a dispiriting finding for the public officials who were hoping to get Costa Rica completely off the list of offshore tax havens.

The OECD defines fiscal transparency as: openness toward the public at large about government structure and functions, fiscal policy intentions, public sector accounts, and projections. It involves ready access to reliable, comprehensive, timely, understandable, and internationally comparable information on government activities so that the electorate and financial markets can accurately assess the government’s financial position and the true costs and benefits of government activities, including their present and future economic and social implications.

According to the OECD Forum report, even though Costa Rica has signed international treaties on transparent tax reporting, our body of laws could impede the free exchange of tax information in an efficient manner. We also lack the administrative capacity to provide financial records requested by other nations, according to the report.

Sources: OECD and Expansion.com