Thursday 28 January 2021

Costa Rica’s Credit Rating Impacted By ‘Slow’ Tax Reform

currency-costa-ricaQCOSTARIA ( Fitch Ratings has assigned Costa Rica a negative credit rating outlook as a result of fiscal reform delays.

The ratings agency said the decision reflected an expansion in the nation’s fiscal deficit, slow tax reform progress, and a weaker economy. Despite these concerns, Costa Rica retained its BB+ rating.

Costa Rica’s fiscal deficit has reached an estimated 5.6 percent of gross domestic product (GDP), the agency said, and the nation’s revenue base remains narrow compared with other nations with the same credit score.

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The new Solis administration, which took office in May of last year, had indicated that it would only gradually implement fiscal consolidation measures. In September 2014 Moody’s Investors Service downgraded Costa Rica’s Government bond rating, to Ba1 from Baa3, also due to delays to its fiscal consolidation program.

Towards the end of last year, the Government confirmed plans for an increase to its 13 percent sales tax and its replacement with a value-added tax. The Government also intends to introduce a “global tax regime” for individuals, requiring that individuals pay tax on their worldwide income.

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