A public university research center has called a comprehensive fiscal reform “necessary and urgent,” warning that Costa Rica’s tax revenue has been sliding since 2023 — a stance that puts technical pressure on a new government elected on a promise not to raise taxes.
The Economic and Social Observatory (OES) of the National University’s (UNA) School of Economics said the drop in public revenue is not a one-off but the product of several factors at once: weaker activity among companies in the standard tax regime, the strengthening of the colón against the dollar, a public-sector wage freeze, and earlier legislative decisions that cut taxes and trimmed the Tax Administration’s enforcement powers.
The observatory laid out a menu of measures rather than a single fix. Among them: cutting tax evasion by businesses, collecting more from individuals — an area where Costa Rica lags the OECD average — and closing a loophole in which the popular Sinpe Móvil mobile-payment system is used to dodge value-added tax (VAT).
The OES also urged the government to scale back some of the country’s many tax exemptions, review the breaks granted to companies in special regimes such as free-trade zones, prepare for the erosion of fuel-tax revenue as vehicles electrify, and consider environmental levies.
The warning lands amid official projections of a shortfall. The Finance Ministry (Hacienda) expects tax revenue of about ₡6.4 trillion in 2026, roughly ₡228 billion — on the order of $500 million — below the ₡6.62 trillion collected the year before, according to La Nación. Hacienda has confirmed it will send Congress a series of bills to improve collection of existing taxes, tighten spending and step up the fight against evasion, but it has explicitly ruled out a new reform that would raise the overall tax burden, stating it does not foresee one.
That position reflects a political bind. President Laura Fernández, who took office on May 9, pledged during her campaign that Costa Ricans would not pay “a single colón more” in taxes, while promising a “deep reform of the State” under continued fiscal discipline. Yet outside voices are pushing the other way.
In its latest Article IV review, the International Monetary Fund recommended a revenue-raising overhaul — applying the standard 13% VAT to the basic food basket, raising the income tax on salaries and taxing the school bonus — which it estimated would lift revenue by about 1.8% of GDP by 2027. The IMF also flagged that Costa Rica maintains more than 400 tax exemptions worth roughly 4% of GDP, about double the regional and OECD average, and said many are too broad and favor higher earners.
For us living in Costa Rica, the debate matters because the options on the table — particularly VAT on basic goods and changes to income tax — would feed directly into our cost of living. Business groups have added their own caveat: the Chamber of Industries has said the revenue slump owes partly to the stronger colón and softer VAT and corporate-income-tax receipts, not solely to “fatigue” with the 2018 reform.
For now, the government’s message and the technical advice point in opposite directions, leaving the question of whether — and how — Costa Rica revisits its tax system unresolved.
