Costa Rica Wrangles Over Reforms
Costa Rica, after more than a decade, is still trying to pass a major fiscal reform package designed to put the Government’s finances on a more assured footing. Granted, there are some controversial elements to the original proposals, including a switch from a territorial to a worldwide basis of taxation, and investors won’t like that. And overall, the package is meant to increase tax revenue as a share of the economy. But for taxpayers, and particularly for foreign investors, policy paralysis is just as bad as a situation where the rules are apt to change frequently, because it also breeds uncertainty and a lack of confidence in the government and the legislature. Perhaps indicative of this displeasure, the lack of a political consensus on the fiscal reforms earned Costa Rica a rebuke from Moody’s Investors Service earlier this month.
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