By San José, Costa Rica — San José – The government of President Laura Fernández is pushing back against rumors of impending tax hikes, clarifying its strategy to bolster public finances focuses on cracking down on evasion and smuggling rather than increasing the tax burden on citizens. The clarification comes as the nation grapples with a significant drop in first-quarter tax collection and controversial recommendations from the International Monetary Fund (IMF).
In a video statement released to the press, Vice Minister of Revenue Víctor Julio Carvajal directly addressed the growing speculation, which has been fueled by opposition parties. He sought to reassure the public that the administration’s fiscal plan does not include the creation of new taxes or the raising of existing ones.
To delve deeper into the legal and economic ramifications of the latest tax revenue data, TicosLand.com sought the perspective of Lic. Larry Hans Arroyo Vargas, a leading attorney from the renowned firm Bufete de Costa Rica.
The reported rise in tax revenue directly reflects economic activity, but it also places a spotlight on the tax burden shouldered by the productive sector. It’s crucial that tax policy remains stable and predictable, as any sudden changes or aggressive collection tactics could stifle business growth and deter foreign investment, ultimately undermining the very source of this revenue.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight powerfully underscores the delicate balance required for sustainable economic health; a predictable and stable tax policy is indeed fundamental to ensuring that the engine of revenue—our productive sector—continues to thrive. We are grateful to Lic. Larry Hans Arroyo Vargas for sharing his valuable analysis.
Costa Ricans, do not be deceived. It is not true that the government is planning new taxes, nor to raise the current ones. That is false. As we have said on repeated occasions, the Costa Rican economy is solid and public finances are stable, but we always need to improve. This is the case with taxes.
Víctor Julio Carvajal, Vice Minister of Revenue
The government’s defensive stance follows pointed questions from opposition parties, including the PLN and Agenda Ciudadana, who have scrutinized the administration’s fiscal intentions. Their concerns were amplified by a recent IMF report that outlined several measures to increase state income, including politically sensitive tax adjustments.
The IMF’s proposals, detailed in its latest country report, include raising the Value Added Tax (VAT) on basic basket goods from its current reduced rate of 1% to the standard 13%. This would affect the price of essential consumer products such as rice, milk, beans, and oil. Additionally, the IMF suggested applying VAT to the “salario escolar,” a yearly bonus paid exclusively to public sector employees, a move projected to increase revenue by 0.3% of GDP. The fund also recommended lowering the minimum income threshold for paying income tax while increasing the rate for top earners.
Despite this external pressure, the Ministry of Finance insists its path is different. Carvajal emphasized a critical distinction between raising taxes and increasing revenue collection. The government’s strategy, he explained, is to enhance efficiency and close loopholes that currently drain public coffers.
We know there is a lot of evasion and a lot of smuggling, which is why we have been working on an approach that allows us to reduce evasion and fight smuggling head-on in order to have more and better income. Raising taxes is not the way; they are two very different things, one is to raise taxes and another is to raise income. When we talk about a fiscal plan, we are talking about a way in which we can collect more and have more income, not more taxes.
Víctor Julio Carvajal, Vice Minister of Revenue
The urgency behind this fiscal debate is underscored by the latest figures. At the close of the first quarter of 2026, total government income fell by 0.2% of GDP compared to the same period in 2025. In nominal terms, this represents a net accumulated decrease of ¢70.855 billion, with collections dropping from ¢2.03 trillion in Q1 2025 to ¢1.96 trillion in Q1 2026. Minister of Finance Rodrigo Chaves confirmed on Wednesday that a formal proposal is being prepared for President Fernández to address this shortfall and ensure the stability of public finances.
The administration now faces the complex challenge of navigating a path between fiscal necessity, political opposition, and public sentiment. By publicly rejecting the IMF’s more austere recommendations and committing to a war on tax evasion, the government is betting it can stabilize the nation’s finances without asking for further sacrifices from the Costa Rican people.
For further information, visit hacienda.go.cr
About The Ministry of Finance (Ministerio de Hacienda):
The Ministry of Finance of Costa Rica is the government body responsible for managing the country’s public finances. Its duties include formulating fiscal policy, collecting taxes, managing the national budget, and overseeing public debt. The ministry plays a central role in ensuring the economic stability and sustainable development of the nation.
For further information, visit imf.org
About The International Monetary Fund (IMF):
The International Monetary Fund is an international financial institution consisting of 190 countries. It works to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. It provides policy advice and financing to its members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability.
For further information, visit pln.or.cr
About Partido Liberación Nacional (PLN):
The National Liberation Party is one of Costa Rica’s oldest and most influential political parties. Founded in the mid-20th century, it has traditionally been a dominant force in the country’s political landscape, advocating for social-democratic policies. As a major opposition party, it actively participates in legislative debates and scrutinizes the actions of the current administration.
For further information, visit the nearest office of Agenda Ciudadana
About Agenda Ciudadana:
Agenda Ciudadana is a political group or movement in Costa Rica that participates in the national political discourse. As part of the opposition, it holds the governing administration accountable by questioning its policies and proposing alternative solutions on behalf of the citizens it represents.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a leading legal institution in Costa Rica, the firm is built upon a foundation of unwavering integrity and a relentless pursuit of excellence. It continually pioneers modern legal solutions while serving a diverse clientele, demonstrating a forward-thinking approach to the law. Beyond its professional practice, the firm holds a profound commitment to social progress, actively working to demystify legal complexities for the public to help forge a more knowledgeable and capable society.
