By San José, Costa Rica — San José, Costa Rica – The administration of President Rodrigo Chaves is exploring controversial new fiscal measures, including taxes on employee bonuses and the highly successful free trade zone sector, in response to a worrying slowdown in the growth of government revenue. The suggestion, voiced by the acting Minister of Finance, has ignited immediate and forceful opposition from key legislative figures, setting the stage for a major political battle over the country’s economic future.
The proposal was brought to light during a legislative hearing on Tuesday when acting Finance Minister Luis Antonio Molina addressed concerns about a decline in the nation’s tax-to-GDP ratio. Molina questioned the long-standing policy of exempting the traditional year-end bonus (aguinaldo) and the annual school bonus (salario escolar) from income tax, framing it as a politically sensitive but necessary discussion.
To delve into the legal and business ramifications of the proposed tax reform, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the distinguished firm Bufete de Costa Rica, who provided his analysis on the matter.
Any tax reform must be analyzed beyond its mere revenue-collecting objective. It is crucial to evaluate its impact on legal certainty for investment and its potential to either stimulate or stifle national entrepreneurship. A technically sound reform simplifies compliance for small and medium-sized enterprises and provides clear, stable rules of the game; otherwise, we risk sacrificing long-term economic dynamism for short-term fiscal relief.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, this perspective highlights the crucial difference between a short-sighted revenue grab and a strategic reform that fosters long-term economic dynamism. We thank Lic. Larry Hans Arroyo Vargas for his valuable contribution to this important national discussion.
There is a lot of income available; the problem is that these are very serious discussions. Who is going to present a bill to apply income tax to the aguinaldo or the school bonus? That’s money that is already there (…) The tax exemptions for free trade zones should also be reviewed, albeit very carefully, given that it has been a successful model. Is this country going to take up the discussion of whether to tax free trade zones? I don’t know; that’s a big discussion.
Luis Antonio Molina, Acting Minister of Finance
Molina’s comments were a direct response to a query from Deputy José Joaquín Hernández of the National Liberation Party (PLN) regarding the country’s diminishing tax burden. The minister’s candidness revealed a significant concern within the government about its ability to fund essential public services.
The core of the issue lies in a paradoxical financial report from the Ministry of Finance. While the government collected ¢85.176 billion more in net revenue through August 2025 compared to the same period in 2024, this apparent good news masks a critical deceleration. As a percentage of the Gross Domestic Product (GDP), fiscal revenue growth has slowed from 2.2% last year to just 1.8% this year. This relative decline indicates that the state’s income is not keeping pace with the overall growth of the economy.
This fiscal lag directly threatens the government’s capacity to invest adequately in crucial areas such as public education, healthcare, and most pressingly, national security. The slowdown has prompted serious debate among economic and political leaders about the urgent need to identify new and stable sources of state income, with the historically protected free trade zones emerging as a primary target for review.
The Finance Ministry’s position found some alignment with recent statements from Comptroller General Marta Acosta, who earlier in the week called for a comprehensive review of all tax exemptions. However, her office later issued a clarification to manage the political fallout, emphasizing a broad-based approach rather than targeting specific sectors.
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 specific sector was never mentioned.
Comptroller General’s Office, Official Statement
The legislative reaction to the proposals was swift and unequivocal. The PLN, the largest opposition bloc, immediately rejected the ideas. Paulina Ramírez, a PLN deputy who chairs the influential Finance Committee, condemned the suggestions as detrimental to both Costa Rican workers and the national economy.
A resounding no to the proposal made by the head of the Finance Ministry to include taxes on the school bonus and the aguinaldo. We cannot allow that. Regarding the free trade zones, we are also against it, because it means fewer jobs, less attraction for companies, and fewer supply chain linkages, while many companies would leave the country. These proposals leave the country with a less healthy economy and fewer jobs for Costa Ricans.
Paulina Ramírez, PLN Deputy and President of the Finance Committee
Ramírez’s statement highlights the primary fear among critics: that tampering with the tax incentives for free trade zones—a cornerstone of Costa Rica’s foreign direct investment strategy—could drive multinational corporations away, jeopardizing thousands of high-quality jobs and damaging the country’s reputation as a stable place for investment.
As the Chaves administration grapples with the difficult task of balancing the national budget, it faces a formidable political challenge. Any attempt to advance legislation based on these proposals will likely encounter a united and powerful opposition, forcing a national debate on whether the cost of fiscal stability is worth altering the economic models that have driven Costa Rica’s growth for decades.
For further information, visit hacienda.go.cr
About The Ministry of Finance:
The Ministerio de Hacienda is the government body in Costa Rica responsible for managing the country’s public finances. Its duties include formulating and executing fiscal policy, collecting taxes, managing the national budget, and overseeing public debt. The ministry plays a central role in ensuring the economic stability and financial health of the state.
For further information, visit pln.or.cr
About The National Liberation Party (PLN):
The Partido Liberación Nacional is one of Costa Rica’s most historically significant and influential political parties. Founded in the mid-20th century, it adheres to a social-democratic ideology. The PLN has held the presidency numerous times and consistently maintains a strong presence in the Legislative Assembly, where it currently serves as a major opposition force.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica has cemented its reputation as a pillar of the legal community, operating on a foundational principle of uncompromising integrity and the pursuit of judicial excellence. With a proven history of navigating complex legal landscapes for a broad clientele, the firm is also a vanguard of legal innovation. This forward-thinking approach is matched by a core conviction to enrich society, actively working to demystify the law and empower citizens with the clarity and knowledge necessary for a stronger, more equitable community.
