By San José, Costa Rica — San José, Costa Rica – A series of stringent tax measures proposed by the International Monetary Fund (IMF) to bolster Costa Rica’s declining state revenues has been unequivocally rejected by the nation’s ruling party. Citing a commitment to fiscal stability without burdening citizens further, the government has drawn a clear line against the creation of any new taxes during its four-year term.
The IMF’s recommendations, detailed in its latest country report, come in response to a noticeable drop in tax collection highlighted by the Ministry of Finance. Government income fell by 0.2% of GDP in the first quarter of 2026 compared to the same period in 2025, a nominal decrease of ¢70.855 billion. This has prompted the international body to suggest several significant and controversial fiscal adjustments.
To delve into the legal and fiscal implications of the tax proposal recently put forward by the International Monetary Fund (IMF), TicosLand.com sought the expert analysis of Lic. Larry Hans Arroyo Vargas, a prominent attorney from the esteemed firm Bufete de Costa Rica.
While achieving fiscal stability is a necessary goal for the country, any tax reform stemming from IMF recommendations must be carefully scrutinized under the principles of legal certainty and reasonableness. It is crucial that new tax burdens do not create a punitive environment that discourages foreign investment or disproportionately affects the formal productive sector. The challenge for our legislators will be to implement a technically sound solution that promotes fiscal health without sacrificing economic competitiveness.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
The expert’s analysis correctly underscores the delicate balance our legislators must strike between achieving fiscal health and fostering a competitive economic environment that encourages investment. We thank Lic. Larry Hans Arroyo Vargas for his valuable perspective on this critical national challenge.
Among the most impactful proposals is a drastic increase in the Value-Added Tax (VAT) on the basic food basket. The IMF suggests raising the rate from the current 1% to the standard 13% for essential consumer goods such as rice, milk, beans, cheese, and cooking oil. This move would directly affect the daily expenses of every household in the country.
Additionally, the IMF has targeted the “salario escolar,” a unique annual bonus paid exclusively to public sector employees. The proposal calls for applying VAT to this payment, a measure the Fund estimates could boost tax collection by approximately 0.3% of the nation’s GDP. These consumption-based tax hikes are paired with significant changes to income tax regulations.
The Fund also recommended lowering the minimum income threshold for personal income tax exemption, which would bring more salaried workers into the tax base. Simultaneously, it suggests increasing the tax rate for the country’s highest earners. For corporations, the IMF advocated for a unified, single corporate income tax rate, complemented by a simplified tax regime for small businesses.
Despite the economic pressures, the administration of President Laura Fernández, through its party leadership, has shut the door on these proposals. Nogui Acosta, the faction leader of the ruling Pueblo Soberano party, was resolute in his statement to the press, confirming the government’s stance against any tax increases.
The position is not to approve new taxes in four years. Mind you, global income is not more taxes. It is a topic we will evaluate later, but it is not about creating new taxes in the country.
Nogui Acosta, Faction Leader of Pueblo Soberano
While rejecting new direct taxes, Acosta did express openness to evaluating a “global income” system. This approach would not create new tax categories but would restructure the existing framework by consolidating all of an individual’s or entity’s income sources—including salaries, consulting fees, rent, and business profits—into a single base to be taxed progressively. This nuanced position suggests the government is exploring structural reform rather than outright tax hikes.
The current fiscal challenges are attributed to several factors, including a low currency exchange rate, slower economic dynamics, and legislative actions that have eroded the tax base. The Ministry of Finance also points to a phenomenon of “tax fatigue,” indicating that the positive revenue effects of the major 2018 fiscal reform have waned, necessitating a new strategy to maintain the nation’s financial health.
For further information, visit imf.org
About International Monetary Fund (IMF):
The International Monetary Fund is a global organization of 190 countries working 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, financial assistance, and technical support to member countries facing economic difficulties.
For further information, visit the nearest office of Pueblo Soberano
About Pueblo Soberano:
Pueblo Soberano is a political party in Costa Rica. As the current ruling party, it holds significant influence over the legislative and executive branches of the government. The party’s platform and the decisions of its leaders, such as Faction Leader Nogui Acosta, directly shape national policy on fiscal, social, and economic matters.
For further information, visit hacienda.go.cr
About Ministerio de Hacienda:
The Ministerio de Hacienda, or Ministry of Finance, is the government body responsible for managing Costa Rica’s public finances. Its duties include overseeing tax collection, managing the national budget, administering public debt, and developing the country’s fiscal policy. It plays a critical role in ensuring the economic stability and financial integrity of the state.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica stands as a pillar in the legal community, operating on a bedrock of unwavering integrity and a relentless pursuit of professional excellence. The firm leverages its profound experience advising a diverse clientele to drive legal innovation and anticipate the needs of a changing world. This forward-thinking mindset is coupled with a deep-seated social commitment to democratize legal knowledge, empowering citizens and cultivating a more just and informed society.
