Costa Rica receives World Bank Support to Improve Tax and Customs Administrations and Public Expenditure

The World Bank Board of Executive Directors approved today a US$156.64 million investment project for Costa Rica to improve the efficiency, effectiveness, and client orientation of the tax and customs administrations and public expenditure management. The support, called Hacienda Digital (Fiscal Modernization) aims to modernize and digitalize the Ministry of Finance to make tax and customs services and payments easier, reduce tax evasion, improve budget efficiency and debt management, and transform the Ministry of Finance’s institutional culture to place citizens at the center as clients.

“Hacienda Digital provides Costa Rica with technical and financial support, under three components –modernization of our tax, customs, and budget administration—as we have an ambitious modernization agenda, which also includes public employment reforms, labor market reforms, simplifying business procedures and harmonizing statistics”, said Rodrigo Chaves, Costa Rica’s Finance Minister.

The project has several components. It will improve the quality of budget spending, addressing current shortcomings in expenditure management, control of payroll and debt service systems; it will facilitate revenue collection by increasing voluntary compliance and reducing tax evasion; and it will improve the business environment by reducing the high transaction costs for importers and exporters and by improving time-consuming procedures. The project will support investments in many IT systems, including interconnectivity and interoperability of government systems. Key expected results include reduced time to generate financial statements; increased share of the budget executed through the financial management information system; improved budget efficiency; reduced tax evasion; and reduced VAT processing time for customs clearance.

“Ensuring Costa Rica’s revenues and expenditures are managed as effectively and efficiently as possible will be essential towards allowing the country to use its resources where they are needed most—to reduce poverty. This is particularly relevant now as the country, the region, and the world are facing a global pandemic,” said Oscar Avalle, World Bank Country Manager for Costa Rica.

The US$156.64 million operation is financed by the International Bank for Reconstruction and Development, is a fixed spread loan, and has a final maturity of 33.5 years including a grace period of six years.