The Organization for Cooperation and Economic Development has released a study showing that while the gap between the rich and poor in most Latin American countries has decreased, inequality in Costa Rica is on the rise.
Costa Rica’s Poor Left Behind, Despite Economic Growth
Though Costa Rica is a leader among Latin American nations in a number of social indicators, since the mid-1990s the inequality indicator has risen exponentially, according to standards outlined by the OECD in its study titled, "Fiscal Policy Analysis of Costa Rica for 2017."
The report reads, in part, that the “limited” amount of funds obtained through tax collection is one of the factors that explains the difference between “before and after tax transfers” in Costa Rica compared to other countries. It also clarifies that the Central American nation’s tax code incorporates little mechanisms for reducing inequality between high and low wage earners.
While the country’s income tax system is progressive, the minimal financial resources obtained from its collection hinders the way in which incomes are equitably distributed, according to Prensa Latina.
The OECD further explains that the average rates of income tax collection are very low, even for taxpayers in the wealthier segments of the distribution of income, as the average rate for the higher deciles is approximately 4.5 percent. The figure falls well short of the legal value of 15 percent.
This rate is also low compared to actual personal income tax rates of the highest income deciles in other countries of Latin American and the Caribbean region the report noted.