QCOSTARICA — The growth of illicit trade in Costa Rica results in significant financial losses for the economy and poses a threat to the health and safety of Costa Ricans.
This was demonstrated at the Forum “Tax simplification as a stimulus to the formal economy: Analysis of the case of illicit trade in Costa Rica,” which was held on Wednesday at the Legislative Assembly.
“The fight against illicit trade is a task that requires the coordinated work of various sectors. This is part of what drives us to hold meetings like this forum,” said Julio Lizano, President of the Board of Directors of the British-Costa Rican Chamber of Commerce (BRITCHAM).
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According to data from the Illicit Trade Observatory of the Costa Rican Chamber of Commerce, illicit trade in its different forms affects multiple sectors of Costa Rican society. Its economic impact is estimated at ¢1 trillion colones annually, equivalent to 2.6% of the Gross Domestic Product (GDP) and 10% of household consumption.
The lack of strong regulatory frameworks and the complexity of the tax system are key factors that facilitate the expansion of these organized crime networks in Costa Rica and the Central American region.
Legislator and former presidential candidate, Eli Feinzag was emphatic in pointing out that “excessively complex tax systems, with many taxes, high and tiered rates, and countless exemptions, encourage evasion and avoidance and constitute an incentive for illicit trade. Thus, they result in less revenue collection, less security for consumers and contribute to the proliferation of organized crime.”
The effects of illicit trade transcend national borders, affecting the economic and social stability of countries. This requires a coordinated international approach and the creation of public policies that strengthen legal and customs systems in the region.
According to the British Ambassador to Costa Rica, Ben Lyster-Binns, “Counterfeiting, piracy and illegal sale of products represent billions of dollars in lost tax revenue for governments, undermine legitimate businesses and leave consumers exposed to poorly manufactured and unregulated products, with potentially serious health consequences. Illicit trade is a global challenge that must be addressed through a coordinated and multifaceted approach at the international level.”
For his part, Alejo Campos, Regional Director of Crime Stoppers CBLA and special guest at the forum, warned that “it is important to understand that behind illicit trade, especially smuggling and counterfeiting/adulteration, there is a network of transnational organized crime, which operates in all countries along the route, associated with national criminal structures.
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They control a logistics chain, with the collaboration of corrupt actors in a system of illicit economies that includes related crimes such as money laundering, drug trafficking, illicit associations and even terrorism. Illicit trade is a fundamental part of the portfolio of criminal goods and services of what we call “criminal convergence” facilitated by kleptocracy. It is no longer just a matter of customs violations or tax evasion.”
Illicit trade in Central America has reached alarming levels. A study by the Inter-American Development Bank (IDB) estimates that in the region, illicit trade represents between 3% and 5% of the GDP, which is equivalent to billions of dollars lost each year.
In Guatemala and El Salvador, this type of trade has come to represent up to 40% of the market for certain products, such as cigarettes and alcoholic beverages. These revenues are not only lost to States, but are captured by criminal organizations that extend their influence to other illegal activities.
In Costa Rica, the impact is equally devastating.
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The International Criminal Police Organization (Interpol) has noted that the smuggling of illegal products, particularly medicines and food, has grown by 30% in the last three years. This has led to an increase in risks to public health, as many of these products do not meet quality standards and may contain dangerous substances.
Illicit trade networks are also linked to drug trafficking and money laundering, exacerbating security problems in the region.
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