More Taxes in Times of Crisis

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%.

See "Nicaragua: Economy Could Fall by up to 11%" and "Nicaragua: 158,000 Jobs Lost in 2018."

Azucena Castillo, deputy and member of the Production, Economy and Budget Committee of the National Assembly, explained to 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."

Also see "How to Oppress an Economy"

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 that "... the tax reform bill plus the new provisions on social security will cause the bankruptcy of companies in the country."

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