The Costa Rican government plans to reduce the taxes paid by energy-efficient and low-emission cars. This tax break will cover hybrids, electrics, and those that are powered by biofuels such as ethanol. Automobiles in Costa Rica currently pay between 35% to 53% worth of consumption tax. The tax rate varies based on the car type, engine size and model.
The draft of the executive decree is now being reviewed by the Ministry of Energy and the Environment (MINAE), Costa Rica’s EPA, and will then be reviewed by the Ministerio de Hacienda - similar to the IRS. Julio Matamoros, the MINAE vice minister informed La Nación that the tax reduction will apply to new and used cars and some models may become totally tax free.
The projected change in taxation follows the lead of the May 2006 law that eliminated taxes for cars powered by electricity, hydrogen or compressed air. At that time, there was also a 15-30% tax reduction for hybrid cars with engines under 2000 cubic centimeters. The RITEVE test that all cars need to pass annually has also been key in helping to get cars that produce high levels of pollutants off the roads.
Currently the only car hybrid car being sold in Costa Rica is the Toyota Prius. About 150 Prius hybrids are on the road today and 3 or 4 are purchased each month. This car is sold by the Purdy Motors car dealership. The new law will hopefully make it more appealing for car dealerships to import energy-efficient and low-emission vehicles to Costa Rica. There is a growing market demand as more and more Ticos and residents look at ways of protecting the environment and save money. The added bonus of not having to pay an excessive premium to purchase one of these cars will certainly make the technology accessible to more car buyers in the near future.
With fossil fuel prices on the rise and no end in sight, alternative fuel transportation is quickly becoming important not only to the trendsetters and environmentally conscious but to everyone who is looking to economize.
Costa Rica Fuel Facts
Privately-owned passenger cars use up almost half the fuel used by road-based vehicles although they only transport 31% of Costa Rica’s population. On the other hand, public transport vehicles transport 54% of the population using only 10% of the total fuel used. According to some sources, passenger cars transport an average of 1.4 people. During the last 13 years the number of public transportation, the numbers of users has declined. One of the reasons for this is that bus routes have not adapted or grown enough to meet the needs of the population. Coupled with these trends is the breakdown of the road system which translates into wasted fuel as cars idle in traffic jams.
Costa Rica relies heavily (70%) on fossil fuels although the country is becoming much more efficient. For example in 1991 it took 1.3 barrels of crude oil to produce $1000 worth of goods and now only 0.8 barrels are needed to produce the same amount. Although this is a positive step, the country’s energy needs continue to increase by about 6% each year. ICE’s failure to meet Costa Rica’s growing energy needs has caused a significant economic impact for private citizens and enterprise as the cost of living continues to rise.
