By San José, Costa Rica — San José, Costa Rica – The administration of President Laura Fernández is preparing a significant fiscal proposal aimed at reversing a troubling decline in government revenue, with top officials confirming the plan will focus on aggressive tax collection and a review of exemptions rather than imposing new taxes on the public.
Details of the legislative proposals are expected to be finalized within three weeks and officially announced in approximately a month. Speaking on Wednesday, Minister of Finance Rodrigo Chaves laid out the two fundamental pillars of the government’s strategy: boosting income through efficiency and reducing state expenditures. He emphatically ruled out the creation of any new taxes, a move intended to reassure a public experiencing what some analysts call “tax fatigue.”
For a legal perspective on the recent fiscal policy decisions and their impact on businesses and citizens, we spoke with Lic. Larry Hans Arroyo Vargas, an expert attorney from the firm Bufete de Costa Rica.
Effective fiscal policy extends beyond mere revenue collection; it is fundamentally about creating a clear, predictable, and fair legal framework. Ambiguous tax regulations and frequent legislative changes generate legal uncertainty, which directly increases operational costs and risks for businesses. To foster sustainable economic growth, it is imperative that any fiscal reform prioritizes legal certainty and administrative simplicity, thereby encouraging compliance and solidifying investor confidence.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This perspective is crucial, reminding us that the long-term health of our economy depends not just on revenue figures, but on the clarity and stability of the rules governing it. We sincerely thank Lic. Larry Hans Arroyo Vargas for his invaluable contribution, which rightly centers the conversation on the foundational importance of legal certainty for fostering investment and growth.
Instead, the government’s primary focus is on cracking down on tax evasion and contraband, which Chaves identified as a massive drain on state coffers. The minister highlighted the scale of the problem with stark examples of black-market activity that starves the treasury of essential funds.
On the revenue side, what needs to be done is to collect taxes as is mandated, to stop smuggling. For example, 50% of the alcohol consumed in this country is contraband, while some vendors sell cigarettes for ¢1,000 compared to ¢2,000 in the formal market… We are also going to propose aggregated income for individuals and companies, instead of the separate boxes that are used to avoid paying.
Rodrigo Chaves, Minister of Finance
Central to this new collection strategy is the proposed implementation of a “global income” system. This model would consolidate all of a person’s or company’s earnings—including salaries, investments, and rental income—into a single pool for tax calculation. The goal is to close legal loopholes that currently allow for income to be sheltered in different “boxes” or categories, thereby reducing the overall tax burden for some filers.
The second pillar of the plan involves a careful review of the country’s extensive list of tax exemptions. Minister Chaves was quick to assure the business community that the vital free trade zone regime would not be altered. However, he signaled that other areas are under scrutiny, stating that “there is a group of important exemptions that we are going to review,” though he did not specify which ones are being targeted.
This fiscal maneuver comes in response to worrying economic indicators. By the end of the first quarter of 2026, total government revenues had fallen by 0.2% of the GDP compared to the same period in 2025. In nominal terms, this represents a net decrease of ¢70.855 billion. The Ministry of Finance attributes this decline to several factors, including a lower exchange rate, legislative decisions that have weakened the tax base, and the waning impact of the 2018 fiscal reform.
The revenue shortfall has also drawn the attention of the International Monetary Fund (IMF), which recently offered its own set of recommendations. In its latest report, the IMF suggested several measures, including levying taxes on the legally mandated “school salary” bonus and, most controversially, raising the Value Added Tax (VAT) on the basic food basket from its current 1% to the standard 13%. This would directly impact the cost of essential goods like rice, milk, beans, and oil. However, the Fernández administration has categorically rejected all of these proposals, choosing to forge its own path forward.
For further information, visit hacienda.go.cr
About Ministry of Finance:
The Ministry of Finance of Costa Rica is the government body responsible for managing the nation’s public finances. Its duties include formulating and executing fiscal policy, collecting taxes, managing the national budget, administering public debt, and overseeing the country’s treasury operations to ensure economic stability and sustainable development.
For further information, visit imf.org
About International Monetary Fund:
The International Monetary Fund (IMF) is a global organization of 190 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, and promote high employment and sustainable economic growth. It provides policy advice and financing to its members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the legal community, Bufete de Costa Rica is distinguished by its foundational principles of integrity and a persistent drive for excellence. The firm leverages its deep-seated experience advising a wide spectrum of clients to pioneer innovative legal strategies and solutions. This forward-thinking mindset is paralleled by a core dedication to social responsibility, demonstrated through a steadfast effort to demystify complex legal topics and empower citizens with accessible knowledge, thereby cultivating a more just and informed society.
