OECD Tax Policy Reviews: Costa Rica 2017

image of OECD Tax Policy Reviews: Costa Rica 2017

This report is part of a new series of publications entitled OECD Tax Policy Reviews. These country reviewsare intended to provide independent, comprehensive and comparative assessments of OECD member and non-member countries’ tax systems from a tax policy perspective as well as concrete recommendations for tax policy reform. By benchmarking countries’ tax systems and identifying tailored tax policy reform options, the ultimate objective of the reviews is to enhance the design of existing tax policies and to support the adoption and implementation of tax policy reforms.

This first edition provides a comprehensive tax policy assessment of Costa Rica’s current tax system as well as tax policy reform recommendations. The report is divided into five chapters, starting with a general chapter providing an overview of key macroeconomic and tax revenue trends (Chapter 1), followed by an assessment of the main types of taxes of the Costa Rican tax system, including corporate income taxes (Chapter 2), personal income taxes and social security contributions (Chapter 3), the general sales tax (Chapter 4) and environmentally-related taxes (Chapter 5)

English Also available in: Spanish

Strengthening the role of the personal income tax in Costa Rica

This chapter discusses the design of the personal income tax (PIT) in Costa Rica, including the tax rate schedule and the income threshold where taxpayers start paying tax, the progressivity of the PIT, the PIT withholding system, the schedular PIT design under which different types of labour income are taxed separately and the PIT evasion by liberal professions. The chapter also discusses the design of the social security contributions (SSCs), focusing on the level of the rates and the minimum contribution threshold, as well as their impact on the incentives to work in the formal economy. The chapter discusses the impact of the lack of integration between the PIT and SSC systems. Average and marginal labour income tax wedges show the combined impact of PITs and SSCs on work incentives.

English Also available in: Spanish


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