Pessimism Over Tax Reform Review

In the government's review of Nicaragua's tax reform that has been in place since February, businessmen consider that no tax cuts will be made, even though production costs in the country have risen considerably.

Tuesday, July 9, 2019

After the approval on February 27, 2019 of the amendment to the Tax Concertation Law, which consists of raising from 1% to 2% the income tax for medium sized companies with higher income, and for large taxpayers from 1% to 3%, the productive sector has reported increases in its production costs.

Álvaro Vargas, president of the Federation of Livestock Associations of Nicaragua (Faganic), explained to that "... The fiscal reform has had several effects on the agricultural sector, inputs have had an increase between 15 and 35 percent, that has caused two things: in the agricultural sector a decrease in the area of planting and in the agricultural sector a decrease in productivity, and if you mix the low international prices, the price increase due to tax reform, INSS reform, fuels and electricity, all that makes you less competitive in the international market."

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Because the law states that three months after it enters into force, the tax reform must be reviewed, the government is currently in the process of doing so.

In this regard, Vargas explained that "... We consider that the review they are doing is to see that it is not giving results, we consider that they are not going to repeal anything, rather what we believe they are going to do is another reform to increase government revenue, to cover the gap between what is budgeted and what is collected."

Businessmen have been excluded from this process, because last week José Aguerrí, president of the Superior Council of Private Enterprise, said the private sector was not invited to participate.

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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.

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Business leaders see the government’s tax reform bill as insufficient and analysts suggest including more sectors in order to stimulate economic activity.

The Superior Council of Private Enterprise (COSEP) has stated that the tax reform bill that the government has sent to the National Assembly, was not consulted on with the private sector and they consider it "inadequate", reports El Nuevo Diario on its website.

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