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Costa Rican FM Calls For Progress On Tax Reform

by Mike Godfrey, Tax-News.com, Washington

29 January 2015


Costa Rica's Minister of Finance, Helio Fallas, has said that the Central Government deficit last year was kept below the level targeted in the yearly budget, but reforms are needed to strengthen the tax base.

The Central Government deficit was 5.6 percent of gross domestic product (GDP) at the end of 2014, lower than the 6.3 percent of GDP predicted in the budget for the year, Fallas said.

The Finance Ministry said that tax revenue grew 6.9 percent last year.

However, Fallas warned that the tax base has been eroded by the uncontrolled use of tax exemptions and trade liberalization, among other things. He urged the relevant parties to approve the country's pending tax reform in order to stabilize the public finances.

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.

Earlier this month Fitch Ratings assigned Costa Rica a negative credit rating outlook due partly to slow tax reform progress.

TAGS: individuals | Finance | tax | economics | sales tax | fiscal policy | gross domestic product (GDP) | budget | Costa Rica | tax reform | trade

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