Economy faces downturn due to lack of tax reform

The Central Bank of Costa Rica (BCCR) warned Monday that the economy will face a growing public deficit and stunted growth if Congress doesn’t pass tax reform.

According to the BCCR, the deficit risks growing to 7.2 percent this year, up from 6.2 percent in 2017.

Economic growth could also see a decline to 3.2 percent from the projected 3.6 percent.

The BCCR said evidence suggests that the longer it takes to pass tax reform, the more of an adjustment will need to be made. That will lead to a higher cost to society. The country’s debt also risks going from 54 percent of GDP to 58.4 percent by 2019 if there’s no tax reform.

The last four administrations have unsuccessfully tried to pass tax reform packages that included new taxes and plans to reign in public spending.

Now Carlos Alvarado’s administration is taking its shot. Congress is currently debating the tax reform proposal put forward by his government.