On 30 August 2019, Costa Rican government presented the 2020 budget to the Legislative Assembly which is 4.3% lower than in 2019, thus representing the largest spending reduction in recent years.
The tax reform adopted by Congress in December is reflected in the 2020 budget project. The tax reform resulted in a value added tax (VAT) of 13%, which replaces the turnover of the same rate but taxed all services before the exemption.
The tax plan also includes cuts in salary bonuses in the public sector and a fiscal rule that limits the growth of current government and public-sector spending. By 2020, salaries will only increase by 1.1% and salary bonuses by 0.9%, which, according to official figures, is very different from those of previous years, when they rose above 4%. This tax plan aims to reduce the budget deficit, which was 6% in 2018, and reduce debt, which reached 53.7% of GDP in 2018.
