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CEQ Working Paper No 18 (English): Social Public Spending, Taxes, Redistribution Of Income, And Poverty In Costa Rica


Social Public Spending, Taxes, Redistribution Of Income, And Poverty In Costa Rica
Working Paper No. 18

A working document by:
Pablo Sauma
Instituto de Investigaciones en Ciencias Económicas, IICE
Juan Diego Trejos
University of Costa Rica

Abstract
Costa Rica allocates 20% of its GDP to finance a broad range of social programs. Social spending is funded primarily through indirect taxes, as well as through specific social security contributions. Using market income as a reference, only direct taxes turn out to be clearly progressive, as opposed to indirect taxes and specific contributions to the social security system, which tend to be rather neutral in relative terms. Nonetheless, most social programs are progressive; in fact, some of them are very progressive –especially cash transfers, which are highly focalized– resulting in reductions in poverty and, principally, inequality. The study highlights the enormous importance of increasing the magnitude and progressiveness of taxes to render public social spending sustainable, as well as to strengthen certain targeted programs with a high impact on the poorest.

Access the working document here:
Updated March 2014
CEQ Working Paper No 18: Social Public Spending, Taxes, Redistribution Of Income, And Poverty In Costa Rica

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