Taxes: When Plans Fail

Although Costa Rica and Nicaragua approved fiscal reforms this year, it is predicted that the expected results in terms of tax collection will not be achieved.

Wednesday, July 24, 2019

The document "Centroamérica: análisis sintético, por país, del desempeño de la recaudación tributaria en 2019", prepared by the Instituto Centroamericano de Estudios Fiscales (Icefi), explains that, in the case of Costa Rica and Nicaragua, the expected results in terms of improved collection are still in doubt.

In the case of Costa Rica, the report states that "... Including the effects of the tax amnesty applied in the first months of the year, it is estimated that collection at the end of 2019 will reflect a 12.8% tax burden, which although it is true would be above the 12.6% of GDP forecast in the revenue budget, as a result of a significant underestimation by the fiscal authorities, would continue with its downward trajectory, far from the 13.2% reported in 2018."

In Nicaragua "... the economy and revenue continue to suffer the consequences of the political crisis that began in April 2018, this instability caused a sharp decline in tax revenue in 2018 and data suggest that the dynamic persists in 2019, despite the implementation of a reform to the Tax Agreement Law approved in the first months of this year.

The projection of closing the tax burden, if all variables continue the current trend, is at 15.1%, below the 15.6% of 2018 and 15.4% projected in the income budget for this year. This will represent a tax gap of approximately 1,038.7 million cordobas (USD31.2 million).

See full report.

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