Vol. 1 No. 1 (2021)
INVESTIGACIÓN

DISTORTIONS OF THE VALUE ADDED TAX IN COSTA RICA

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  • Eduardo Vargas Ramírez
Eduardo Vargas Ramírez
Grupo Camacho Internacional

Published 2021-01-25

Keywords

  • Value added tax (VAT), neutrality, efficiency

How to Cite

Vargas Ramírez, E. (2021). DISTORTIONS OF THE VALUE ADDED TAX IN COSTA RICA. Rhombus, 1(1), 80–89. Retrieved from https://revistas.ulacit.ac.cr/index.php/rhombus/article/view/123

Copyright (c) 2023 Rhombus

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Abstract

The adoption of a Value Added Tax (VAT) substantially modified indirect taxation in Costa Rica. In the discussion of this law, the policy makers focused on the effects of VAT on consumers. It was hardly analyzed the VAT effect on the supply of goods and services. Elements such as the neutrality of VAT and the distortions that a tax of this nature can generate in the market were not considered. The analysis identifies in which scenarios the neutrality of the tax is not met, which, applying Diamond and Mirrlees’ Production Efficiency Theorem, leads to a loss of efficiency in the market.

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References

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