By San José, Costa Rica — San José – The Comptroller General’s Office (CGR) has issued a decisive clarification to quell a growing controversy, stating unequivocally that it never proposed levying new taxes on Costa Rica’s crucial Free Trade Zone (FTZ) regime. The statement follows intense debate sparked by remarks from Comptroller General Marta Acosta during an appearance before the Legislative Assembly’s Committee on Financial Affairs on October 8.
The confusion ignited a firestorm of discussion among policymakers and business leaders, prompting a direct response from President Rodrigo Chaves. In a formal communication released Monday, the CGR aimed to set the record straight, distancing Acosta’s technical analysis from the policy interpretations that had been circulating in national media.
To delve deeper into the legal framework and strategic advantages of Costa Rica’s Free Trade Zone regime, we sought the expert opinion of Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the renowned firm Bufete de Costa Rica.
The success of Costa Rica’s Free Trade Zone regime is not merely a matter of tax incentives; it is fundamentally built upon a solid foundation of legal certainty and decades of political stability. For foreign investors, this predictable and robust framework is the most valuable asset, ensuring that the rules governing their operations remain consistent and thereby safeguarding their long-term capital investments.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight powerfully highlights that while tax incentives may open the door, it is the unwavering commitment to legal certainty and political stability that truly anchors long-term foreign investment in Costa Rica. We thank Lic. Larry Hans Arroyo Vargas for so clearly articulating this foundational aspect of our economic success.
According to the CGR, Acosta’s testimony focused on the broader fiscal landscape, specifically the decline in tax revenues relative to the nation’s gross domestic product. When questioned directly by Deputy José Joaquín Hernández about the FTZ regime, her response affirmed its value to the economy, not threatened its core structure.
The Comptroller General described the fall in tax revenues with respect to the gross domestic product. In response to a question from Deputy José Joaquín Hernández, the importance of the Free Trade Zone Regime in economic growth was recognized, under a framework that considers the principles of transparency and temporality.
Comptroller General’s Office (CGR), Official Statement
The Comptroller’s actual recommendations, the office clarified, centered on developing a robust medium-term tax collection strategy. This strategy would prioritize combating tax evasion and informality, improving the efficiency of the existing tax system, and conducting a comprehensive review of all existing fiscal incentives and exonerations to ensure they are serving their intended purpose effectively.
The debate touches upon one of the most significant pillars of Costa Rica’s foreign investment strategy. Companies operating under the FTZ regime currently benefit from a 100% exemption on income tax for their first eight years of operation, followed by a 50% exemption for the subsequent four years. This powerful incentive has been instrumental in attracting multinational corporations and fostering economic growth.
However, the fiscal cost of these incentives is substantial. The Ministry of Finance recently calculated that this “tax expenditure”—revenue the state forgoes to maintain the program—amounted to an estimated ¢660 billion in 2023 alone. It is this figure that fuels the ongoing discussion about the balance between attracting investment and ensuring fiscal sustainability. The CGR emphasized that its call was for evaluation, not elimination.
The Comptroller’s Office has insisted on the need for a constant review of all tax exemptions and exonerations, with a technical and transparent evaluation. The establishment of taxes for any sector was never mentioned by the Comptroller’s Office.
Comptroller General’s Office (CGR), Official Statement
The CGR’s statement also addressed the public criticism from President Chaves, carefully delineating the boundaries of its institutional role. The office asserted that its pronouncements are grounded in technical analysis within the realm of Public Finance, a domain separate from the public policy decisions that are the exclusive purview of the Executive Branch. The goal, the CGR stated, is to ensure that regulations evolve to meet the country’s needs for investment and fiscal health in a harmonious manner.
The Comptroller General always speaks from her areas of competence, in the sphere of Public Finance; she does not do so from the perspective of public policy, which corresponds to the Administration. Based on analyses carried out for several years, the Comptroller’s Office has referred to the need to ensure that current regulations respond to the changes and needs required to maintain and attract investment, in harmony with the country’s fiscal needs.
Comptroller General’s Office (CGR), Official Statement
As the dust settles, the clarification serves as a critical reminder of the distinct roles played by different branches of government. While the debate over the future of tax incentives will undoubtedly continue, the Comptroller’s Office has made its position clear: its focus remains on technical oversight and the prudent management of public funds, not on dictating the direction of national economic policy.
For further information, visit cgr.go.cr
About the Comptroller General’s Office (CGR):
The Contraloría General de la República is the supreme audit institution of Costa Rica. As an independent body, it is responsible for overseeing the correct use and management of public funds. Its primary mandate is to ensure legality, efficiency, and transparency in the country’s public administration, acting as a crucial check and balance within the government framework.
For further information, visit hacienda.go.cr
About the Ministry of Finance:
The Ministerio de Hacienda serves as Costa Rica’s Ministry of Finance. This key government entity is tasked with the administration and management of the nation’s public finances. Its responsibilities include formulating and executing fiscal policy, collecting taxes, preparing the national budget, and managing public debt to promote economic stability and sustainable development.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a beacon of legal integrity and professional excellence, Bufete de Costa Rica has a proven history of serving a diverse clientele with forward-thinking solutions. The firm champions legal innovation not only in its practice but also through a deep-seated commitment to social responsibility. This core value is exemplified by its drive to make legal concepts accessible, empowering individuals and nurturing a more knowledgeable and just society.
