Costa Rica will invest $ 156 million in the digitization and modernization of the Ministry of Finance, in an effort to improve spending control and the fight against tax evasion, the Government reported.

The President of Costa Rica, Carlos Alvarado, and his Minister of Finance, Elian Villegas, signed this past weekend a loan from the World Bank for $ 156 million, which was approved by the National Assembly, and which will be invested in the Digital Finance Plan.

According to the Government, this project “will transform, modernize and digitize the management of the Ministry of Finance, to have better tools for identifing tax evasion and improving the efficiency of public spending, debt management and provide an improvement in service oriented to the taxpayer“.

President Alvarado thanked the deputies for having approved the loan and stressed that Costa Rica “needs to fight head-on against tax evasion and fraud” through the Digital Finance Plan that brings together “the best practices, digitization and simplification of procedures.”

So far, the finance ministry is making progress on the design of the business architecture and terms of reference, as part of the first phase of the project, the government said. According to the general plan, the Government plans to carry out the bidding processes between January and October 2021, subsequently, the adaptation of the systems and their implementation will be carried out so that the digitized system begins to operate in January 2023.

With Digital Finance we will transform our systems and services for the benefit of citizens and the country, its implementation will provide the Ministry of Finance with state-of-the-art technology to improve intelligence actions in the fight against tax evasion and controls over the national budget and the public spending”, affirmed Villegas.

The official assured that the Digital Finance project will allow the country to adopt best practices to prepare its personnel in order to offer a more efficient and effective service to citizens.

Modernization priority

The modernization for the systems of the Ministry of Finance is one of the projects that the Government of Alvarado has promoted as a priority given the deterioration they have experienced in public finances in the last decade, and especially this year due to the COVID-19 Pandemic.

Costa Rica began to register a growing fiscal deficit since 2008 and in December 2018 the National Assembly approved a controversial tax reform promoted by Alvarado to alleviate the deficit that was already higher than 6% of gross domestic product (GDP).

The reform was just beginning to be implemented when the COVID-19 Pandemic appeared, which forced the closure of most economic activities for several months and consequently there was a drop in revenue collection.

Official projections indicate that Costa Rica will close 2020 with a fiscal deficit of 9.2% of GDP and an accumulated debt of around 70% of GDP, to which is added a drop in the economy of 4.5%.

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