Q COSTA RICA – Costa Rica may opt for a lower value-added tax (VAT) rate if and when it implements the tax reforms.
The International Monetary Fund (IMF), during a recent visit to Costa Rica, noted the plans in its Article IV consultation with the country.
In December 2016, the IMF urged Costa Rican legislators to adopt the “much-needed” consumption tax and income tax reforms currently before Legislative Assembly. However the tax reform proposal has yet to be approved.
It was previously proposed that the rate would be increased from 13% (the current sales tax on goods) to 15% that would on sales of goods and services.
The IMF said that it has heard from authorities that Costa Rica will no longer increase the rate, significantly reducing the revenue that could be received from replacing the general sales tax with VAT.
The IMF estimates that the new VAT will boost revenues by just 1.5% of gross domestic product (GDP), despite plans to more broadly apply the headline rate, “mainly due to the removal of the VAT rate increases.”