Costa Rica rating downgrade spurs VAT reform

Costa Rica is to join the growing number of countries seeking to stablise their government deficits through the introduction of a modern Value Added Tax regime.

The movement to overhaul the current 13% simple sales tax has come following a downgrade of the economies credit rating by Moodys. It slipped from BB1 to BAA3. Moody’s noted the political difficulties on agreeing on a new VAT regime as one of the reasons for the downgrade.

It is estimated that the VAT reform could generate over $0.5 billion, and help reduce sales tax fraud.