Costa Rica’s Mobile Payment Surge Fuels Widespread Tax Evasion

Costa Rica’s rapid adoption of the Sinpe Móvil payment platform, as documented by recent reports and official data, has transformed the country’s retail landscape and banking sector.

The Central Bank launched Sinpe Móvil in 2015, but its use soared after the pandemic. By late 2024, 76% of Costa Ricans over age 15 actively used the system, conducting hundreds of millions of transactions each year.

This shift reduced cash use and cut banking costs, as banks processed fewer cash transactions and managed lower operational expenses. Retailers and consumers embraced Sinpe Móvil for its speed and simplicity.

The system allowed instant payments for everything from groceries to services, with more than half of users paying for goods or services through the platform. However, this convenience came at a cost.

Businesses, especially in the informal sector, began using Sinpe Móvil to collect payments without issuing invoices. This practice allowed them to underreport income and avoid value-added tax and income tax obligations.

Closing the Sinpe Móvil Tax Loophole

The Ministry of Finance confirmed that the state loses significant tax revenue each year because many businesses exploit this loophole. Experts and tax authorities agree that the payment method itself is not the root cause of evasion.

Instead, the lack of integrated controls enabled widespread underreporting. The absence of an automatic tax withholding mechanism for Sinpe Móvil transactions further contributed to the issue.

Unlike card payments, which automatically withhold taxes, Sinpe Móvil transactions left it up to businesses to self-report sales. Many did not, and the government struggled to track these payments effectively.

The Ministry of Finance and the Central Bank have responded by developing a new system to automatically withhold value-added and income taxes. This system applies to business transactions made through Sinpe Móvil.

The new mechanism, expected in 2025, will not affect personal transfers. It aims to close the loophole and ensure that businesses pay their fair share of taxes, leveling the playing field for formal and informal commerce.

This move comes as Costa Rica seeks to strengthen its fiscal position and maintain its reputation for financial transparency. The Sinpe Móvil story highlights how digital innovation can bring efficiency and inclusion but also new risks if regulatory frameworks do not keep pace.