How to Oppress an Economy

In Nicaragua, the government plans to increase employer, labor, and state Social Security contributions, and to approve a tax reform that would increase taxes for medium and large companies.

Tuesday, January 29, 2019

Although the country has been in a serious economic and political crisis since April 2018, when the government tried to implement reforms to the Nicaraguan Institute of Social Security (INSS), the Ortega administration is once again trying to make changes to the institution, this time through an administrative resolution.

One of the main reforms proposed for the INSS is the increase from 19% to 21.5% of the employer's contributions for companies with fewer than 50 workers, and in the case of companies with more than 50 workers, it proposes to increase it from 19% to 22.5%.

State contributions would rise from 0.25% to 1.75% and labor contributions would increase from 6.25% to 7%. The changes contemplated in the resolution would be implemented from February 1, 2019.

See "Nicaragua: Domestic Consumption Declines"

In addition to the changes foreseen for the INSS, the Minister of Finance and Public Credit, Iván Acosta, presented a proposal for tax reform on January 28 before the National Assembly, which includes the increase of taxes on companies.

The most important changes included in the tax reform are the increase in income tax, which would rise from 1% to 2% for medium-sized companies with higher income and from 1% to 3% for large taxpayers.

See also "The numbers of the crisis"

The president of the Consejo Superior de la Empresa Privada (Cosep), José Adán Aguerri, told Elnuevodiario.com.ni that "... the tax reform bill plus the new provisions on social insurance will cause the bankruptcy of companies in the country."

Sergio Maltez, president of the Chamber of Industry of Nicaragua (Cadin), explained that "... 'The solution to the political crisis is not solved by an economic reform ... With this initiative at this precise moment, in which the companies have lost competitiveness with the fall in sales, plus the economic slowdown in the country, what comes is to encourage the closure of many companies. the tax reform plus the new social insurance measures mean that 'here we no longer only talk about unemployment, but about the closure of companies; the population will lose purchasing power of their monthly income, it is very serious'."

See articles from Elnuevodiario.com.ni "Government increases contribution of the INSS to workers and companies" and "Cosep: Reforma will break companies"



More on this topic

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Retention of raw materials by the authorities of Customs and charges to businessmen by the mayors, are some of the problems that are affecting industrial companies in Nicaragua, in addition to the crisis and the rise in taxes.

Directors of the Chamber of Industries of Nicaragua (Cadin) reported that companies in the packaging, beverage and dairy industries are the most affected by the withholding of inputs made by the General Directorate of Customs (DGA).

Tax and Minimum Wage Tension

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In Nicaragua, there is uncertainty because the government is reviewing the tax reform without the participation of businessmen, and because adjustments to the minimum wage could be made in September.

Weeks ago, it was reported that when the government's review of the tax reform in force in the country since February is completed, businessmen consider that no tax cuts will be made, despite the fact that production costs in the country have risen considerably.

Taxes and International Prices Damage Agriculture

March 2019

The recent fiscal reform, changes in social charges in Nicaragua and low international prices are affecting the competitiveness of the sector.

At the end of February 2019, in the midst of the country's political and economic crisis, the National Assembly approved a tax reform that increases the income tax of large taxpayers from 1% to 3%.

More Taxes in Times of Crisis

February 2019

In the midst of Nicaragua's political and economic crisis, the National Assembly approved a tax reform that increases the income tax of large taxpayers from 1% to 3%.

On the morning of February 27th, the reform of the Tax Concentration Law was approved, which also contemplates raising from 1% to 2% the income tax for medium sized companies with higher incomes.

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