Private vehicles up to six years old could soon enjoy an additional discount on their “marchamo” (vehicle circulation permit) payment. This is based on a proposal under discussion by legislators, which aims to reward vehicles for their weight and emissions.
Progressive Liberal Party’s Initiative
This initiative is driven by the Progressive Liberal Party (PLP). It suggests that vehicles, based on their year and model, might receive a tax cut ranging from 3.84% to 1.14%. Both combustion and electric vehicles would benefit. However, electric vehicles would enjoy a permanent advantage.
For instance:
- A combustion vehicle, one year old, would get a 3% discount for its weight and an additional 0.84% cut for emissions, totaling a 3.84% tax reduction.
- A car, six years old, would enjoy a 1% discount for weight and 0.14% for emissions, summing up to 1.14%.
- An electric vehicle, irrespective of its age, would have a 0.1% permanent discount.
This means, for a 2024 light vehicle worth ¢10 million with a tax of ¢144,360, the final payment, after a ¢5,543 deduction, would be ¢138,800. Similar discounts apply to vehicles from 2023 and 2022.
Recommendation from International Bodies
Jorge Dengo, a PLP deputy and the proposal’s drafter, explained this incentive aligns with recommendations from the Organisation for Economic Co-operation and Development (OECD) and the Inter-American Development Bank (BID). Both organizations have encouraged Costa Rica to adopt policies advancing decarbonization in the short to medium term.
Originally, the project considered setting rates based on weight and emissions. Still, most legislators voiced concerns, leading to an adjusted proposal favoring marginal discounts in line with economic capabilities.
Data from the National Laboratory of Materials and Structural Models (Lanamme) and the State of the Nation report provided insights to define these percentages. The latter indicates newer vehicles emit fewer hydrocarbons, influencing the project’s proposed discount rate ranging from 0.14% to 0.84%.
Moreover, heavier vehicles cause more damage to road infrastructure. Hence, discounts between 1% and 3% are proposed based on vehicle weight.
Controversies and Way Forward
A special legislative commission’s approved text could reduce the vehicle property tax by up to 67%. The government has criticized this plan, citing potential state revenue losses of up to ¢118,000 million annually. Yet, legislative leaders agreed last Thursday to expedite the initiative’s approval process.
