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%.
Wednesday, February 27, 2019
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.
This tax reform is during one of the worst times in the country's economy, as it is estimated that during 2018 Nicaraguan production fell by about 4%, and by 2019 it is expected that the fall in Gross Domestic Product could be between 7% and 11%.
Azucena Castillo, deputy and member of the Production, Economy and Budget Committee of the National Assembly, explained to Elnuevodiario.com.ni.ni that "... this reform is extemporaneous, given the country's economic recession. It's not that we're opposed to a better distribution of wealth (but) when should it have been done? When the country was harvesting and growing at 5%, not now that we are in recession and in danger of depression."
Regarding the increase in the payment of Income Tax, Castillo said that "... with this measure the number of large taxpayers is further reduced. Right now we must look at how that 8% of taxpayers should become 10% or 30%. If the economic is based on 8%, why are we going to reduce it with that intention of putting it from 1 to 3%. We are treating the cause with the worst medicine."
Since the plans to raise taxes in the country were announced, the business sector has expressed its opposition. At the end of January of this year the president of the Superior Council of Private Enterprise (Cosep), José Adán Aguerri, told Elnuevodiario.com.ni that "... the tax reform bill plus the new provisions on social security will cause the bankruptcy of companies in the country."
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.
In Nicaragua, the business sector is preparing an appeal of unconstitutionality against the Tax Concertation Law, approved a few days ago by the National Assembly.
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.
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.
With the reform to the law on Tax Concentration non-resident investors in the country will have to pay 15% instead of 10% on income earned from capital.
According to Juan Sebastian Chamorro, executive director of the Nicaraguan Foundation for Economic and Social Development, the new reform "...
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