CAJA Fees to be Reduced for Employers
The CR Government plans to reduce the CAJA costs for employers. The measure is intended to promote job creation. The government reckoned that reducing the cost of operations for business owners will result in more
The CR Government plans to reduce the CAJA costs for employers. The measure is intended to promote job creation. The government reckoned that reducing the cost of operations for business owners will result in more hires. This measure is included in the Plan to overcome the fiscal plan to overcome the pandemic.
According to the government “this would allow a substantial reduction in payroll costs and stimulate employment by reducing the social charges assumed by companies by at least 5 percentage points, for a period of 4 years.” While the government states the reduction of payroll costs is substantial it will only lower the costs in 5%. Savings are savings, but these are not substantial savings.
The government plans to replace the reduction of the revenue in the CAJA contributions with the taxes on financial transactions. You can read the tax proposal here.
According to the new tax proposal, ₡30 for each transaction of ₡ 10,000 would be directed to the financing of social programs to fight poverty. Some of these programs include but are not limited to cash transfers for students, the operation of the CEN-CINAI which are care centers for children, electrification in rural areas, construction of school cafeterias, rural aqueducts, and loans to small businesses.
With this proposal, and the reduction of the CAJA fees, a small business with a payroll expenditure of ₡ 1,500,000 per month will be able to save ₡ 75,000. Here are some examples:
The Press Secretary states that “action is necessary due to the strong impact that the pandemic has generated on the national economy and employment”, a situation that is reflected in data from the National Institute of Censuses and Statistics (INEC), which indicates that there are just over 700,000 people unemployed or with informal employment (such as street vendors).
While the government believes that reducing the costs for CAJA will result in companies (big or small) hiring more people, what dictates whether a company hires more people is not the cost of labor but the demand for goods or services. Most likely, employers will not increase payroll just because the cost of CAJA will be lower.
Whether business owners will hire more people remains to be seen. However, the reduction of CAJA fees is good news for business owners.
