In the midst of the pandemic, and partially due to the economic support distributed to its citizens, the fiscal deficit increase in Costa Rica forced the Government to take measures to finance its State debt. Debt is expected to reach approximately 70% of GDP in 2021, above the average for the Latin American region.

Therefore, in September 2020, the Government announced a process of tax scale review, spending cuts and State assets selling, despite having recently implemented a reform of the tax system (2016). The new reform was also intended to prepare a negotiation of a USD 1.75 billion loan with the International Monetary Fund (IMF).

Following the announcement, strong popular disagreement, protests and blockades forced the government to withdraw its proposal.

With the aim of defining measures to contrast the fiscal deficit, the Government, together with the legislative power, decided to convene a Multi-sector Dialogue Table, with more than 60 participants.

The measures promoted by the business sector at the Government's Multi-sector Dialogue Table were: 1) the modernisation of the National Learning Institute (INA) (already executed by law); 2) support for the implementation of the Integrated Public Procurement System (SICOP) in all public sector entities; 3) reduction of political debt by at least 40 %; 4) firm support for the Digital Finance project; 5) Promotion of the project to reform the efficiency in the administration of public resources (PAGAR) and 6) the implementation of global income with a maximum ceiling of 27.5% from 2023, which would contribute to the formalisation of more companies, payment of taxes and reduction of tax evasion.

In addition, given the lack of political impulse to solve a wide range of problems and in the context of the significant decline in economic activity due to the pandemic, a new dialogue table was called by the Assembly of Workers of the “Popular Bank and Community Development” (Banco Popular y Desarrollo Comunal), a national bank owned by citizens. This second dialogue table, with 159 participants, has focused its work on the issue of economic recovery.

Among the topics discussed by the Multisectoral Dialogue Forum convened by the Popular Bank are: making the payment of social security contributions more flexible for three years, promoting an extraordinary and temporary contribution of capital income on term deposits, for three years; promoting the review of exemptions; promoting improvements in tax management through the Digital Treasury to avoid tax evasion and fraud; stimulating a temporary voluntary contribution from the cooperative sector; refinancing the internal government debt, among others.

At present, the Multisectoral Dialogue Forum convened by the Popular Bank remains active with the participation of 36 organisations.

On the contrary, the government’s Multi-sector Dialogue Table concluded its work in November 2020.

The Costa Rican Union of Chambers and Associations of the Private Business Sector (the Unión Costarricense de Cámaras y Asociaciones del Sector Empresarial Privado – UCCAEP), participated in both dialogue tables, which ran in parallel, trying to advance with the most important issues at this stage.

Specifically, UCCAEP advocates for finalising the loan from the IMF, with which the country would have more economic sustainability, an improvement in the investment of climate and employment, and would better manage its fiscal deficit. This loan must be approved before June 2021.

However, according to UCCAEP, the agreement must be accompanied by measures that allow for economic recovery, support for the private sector, job creation and a reduction of informality levels.

One of the proposals of the multisectoral roundtables of great importance for UCCAEP is the “increased flexibility of social security contributions for micro, small, medium and large companies, with the aim to expand the coverage of health services and retirement”.

Added to this is the “three-year flexibility of social security contributions, through a 5% reduction in the Social Development and Family Allowances Fund (Fodesaf) to all companies, which would go hand in hand with the commitment of the business sector to agree to increase the income tax by 1.5% for incomes higher than CRC 110 million for a period of three years”.

According to UCCAEP: “Also, the objective is to favour and prioritise entrepreneurship, decent work and the reduction of informality through access to credit, simplified red tape and support and education for entrepreneurs. On this same point, productive chaining programmes will be stimulated to promote business and entrepreneurship”.