This question should have a very simple answer, but as the days go by and the “strike” continues, the answer changes depending on who you ask.

In short, the labor unions (sindicatos) are protesting the fiscal plan, formally known as the Law to Strengthen Public Finances, which is currently being discussed at the Legislative Assembly and has undergone some changes since it was originally presented to congress.

The fiscal plan touches on many aspects, but mainly it focuses on going from a tax sale to a value added tax (VAT) with the purpose of generating fresh revenue and it puts limits or eliminates some of the salary pluses or “privileges” that the public sector employees enjoy and that are not sustainable.

The problem of the fiscal crisis, put in simple words, the fact that the government spends more than it collects, is not new, it has been a known problem for years (12), it has been pointed out by national experts and institutions as well as international entities such as the OECD  and the IMF, and even though some attempts have been made to make changes in the past administrations (Arias, Chinchilla and Solis), at the end, for different reasons, it hasn’t happened, and it has brought the country’s finances to a very critical point.

Now that this has been explained, lets go back to why some public employees are protesting. One thing is what the labor union leaders say and another thing is what the group of protesters say. They cite, the VAT, some complain about the corruption, others say they don’t want their salary to be cut down, others are defending their salary pluses, others say they don’t want to pay tax over their rent or public services, and the majority complain about luxury pensions and all of them say the fiscal plan affects those with lower income.

It is clear and easy to understand that raising taxes is never a popular idea, but is the fiscal plan really going to affect those with lower income?

The problem is that some of the reasons they cite (most of them) are based on false or manipulated information while others have nothing to do with the fiscal plan or with this administration. For example:

Salary cuts:  The labor code in Costa Rica makes reference to what is known as “Derechos Adquiridos” or acquired (earned) rights, what this means is that if an employee was hired with certain conditions (salary, bonuses, etc.) these conditions cannot be modified in their detriment, in other words, they can receive a raise, but they cannot receive a salary cut, unless that employee is fired, gets his severance pay and rehired under new conditions. So, the salary of all public employees right now is and will remain untouched. Those that will be affected will be those that are hired after the fiscal plan is implemented, which will be hired under new conditions.

Salary tax: This tax has existed for years; the difference is that some of the values were changed. Now, the first and most important thing to know is that anyone that makes under 799 thousand colones  (approximately $1380.00 with today’s exchange rate) are NOT subject to salary tax (they pay $0), it is also important to mention that the majority of people in the work force (around 70%) are in this category. Those that make over 800 thousand colones pay 10% in taxes; salaries of more than 1.2 million colones pay 15%; a salary of over 2.1 million colones pays 20%  and finally amounts over 4.2 million colones pay 25%.

Tax over rent and public services: Again, this has been another misconception. Taxes are only applicable over rents that  exceed 648 thousand colones (approximately $1120.50 USD), statistics show that over 95% of the people that rent pay less than this amount.  When it comes to public services, the VAT will be applied to electricity when the consumption exceeds 280 kw/h (average is 200-220); when it comes to water, VAT will be applied for those that use over 30 m3  of water a month (Average is 15 m3). This shows that the most affected by these measures are those with higher income.

Luxury Pensions: This is something that has been evaluated extensively and where changes began being implemented since 2013. Some of these pensions have already been reduced, others are being reviewed. In fact, the Constitutional Chamber is currently studying several appeals presented by beneficiaries of this pensions complaining of the new structure.  All luxury pensions are received by Public employees, in particular the Education Sector (the Dean of the University of Costa Rica is at the top of the list) followed by employees of the Judiciary system and Treasury, some limits and cuts are already in place while others are still in process.

The Fiscal Plan does cut or limit 14 salary pluses or “privilages” that public employees receive.

Tax Evasion: Is also cited by many protesters. Part of the reason of implementing the VAT and the digital invoices has to do with keeping better controls.  Even though protesters always refer to a fiscal evasion of 8% of the GNP that is a number given in 2013, the current number, provided by the IMF is of 4.6% of the GNP which is still high and unacceptable, but it is something the fiscal plan is trying to tackle.

The labor unions continue to insist on charging more to the companies in the free trade zones, however, according to PROCOMER, for every $1 exonerated to these companies they return $6.00 and they are a great source of employment.

The government has explained that the measures being taken are just the FIRST step in a long process of adjustments that will have to be done to stabilize the economy and offer stability and security to foreign investors.

So, why are public employees protesting?

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