Costa Rican government proposes reforms to improve its fiscal situation

Costa Rica’s Minister of Finance, Nogui Acosta, presented yesterday a program with reforms in tax collection to improve the country’s tax collection and debt profile.

The plan “Hacienda en Acción: trazando la prosperidad fiscal” proposes a series of adjustments, such as a change in the income tax base, which will now be 842,000 colones per month (1,559 dollars).

Under this tax, all income of individuals for different items such as salaries, pensions, professional services, leases, and investments will be taxed.

“We are going to abandon the idea that a worker pays one tax, a legal entity pays another tax, that is to say, we will eliminate this dispersion in the payment.”

There will be a general regime and a special one, where we will integrate income from salaries, business activities, and real estate capital,” said Acosta.

The proposal will also integrate the income of legal persons and entities tax residents in the country, who will have a single tax of 15 percent.

The levy will apply to Costa Rican source income, including those resulting from economic activity, income, and capital gains.

“Today we have a dispersion of remittances abroad; for example, people who come to do concerts in the country, we will charge them a 15 percent tax because they obtained profits in national territory,” Acosta added.

In debt, the Costa Rican government will manage two international loans, one with the Andean Development Corporation for 4.65 billion dollars and another with the Resilience and Sustainability Facility for 710 million.

The proposal of the Government of President Rodrigo Chaves also includes changes in the Vehicle Property Tax, the evaluation of some exonerations, and the centralization of the public debt management in a single instance of the Ministry of Finance.

Costa Rica’s fiscal deficit for 2022 was 2.5 percent of the country’s Gross Domestic Product, and it still faces high levels of public debt above 60 percent of GDP.

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