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The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) has said that Costa Rica needs to build on its recent fiscal reform efforts with comprehensive and timely measures.
ECLAC Executive Secretary Alicia Bárcena recently met with Costa Rica's Vice President and Finance Minister, Helio Fallas, to review ECLAC's collaboration with the Central American country. During her presentation she indicated that Costa Rica's fiscal deficit has structural roots and originated from the elimination of duties on foreign trade, fiscal incentives, and spending without offsets.
She praised the fiscal reform that the Government is undertaking with the aim of increasing the tax burden, fighting fraud, transforming the current sales tax into a value-added tax (VAT), modifying income tax, and putting an end to some fiscal exemptions. However, she said that further fiscal reforms are needed to maintain what has been achieved.
The Executive Secretary said that countries in Latin America and the Caribbean collect few taxes, with taxation levels of around 20 percent versus rates of over 30 percent in OECD countries. She said Costa Rica should look to boost the tax burden and tackle tax evasion, which she identified is a significant problem in the region, with illicit outflows amounting to USD150bn, or double the income from remittances (around USD63bn).
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