What Will Proposed Tax Reforms Mean for Costa Rica?
Costa Rican President Rodrigo Chaves’ government proposed bills in May aimed at reforming the country’s tax system. Provisions within the four bills include approving a new income tax, eliminating specific value-added tax exceptions and granting greater control, a corporate income tax and inspection powers to the tax authority. What is the current status of the tax reform, and what are some of its most important details? Who would be most affected by these changes? What are the chances of the reforms being passed?
Lucas Perelló, assistant professor of political science at Marist College: “Costa Rica has a pressing need for tax reform to strengthen the troubled state of its public finances. The government’s gross debt continuously expanded under the two center-left Citizens’ Action Party (PAC) presidencies from 2014 to 2022. As elsewhere, the government’s response to the Covid-19 pandemic led to a significant surge in debt, which reached 68 percent of GDP in 2021, according to the International Monetary Fund. In 2022, Rodrigo Chaves, who had a brief seven-month stint as minister of finance during the government of Carlos Alvarado, ran for president, promising tax reform. Hence, there was no question whether Chaves would present a tax reform. It was mostly about when that would happen. After months of speculation, his government unveiled the reform in May, rather late considering…”Read More
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