Tax reform: Less Jobs

Businessmen in the industrial sector in Nicaragua say that since the tax reform was implemented in the first quarter of the year, employment has fallen between 30% and 35%.

Thursday, July 4, 2019

On February 27, 2019 was approved the amendment to the Law of Tax Concertation, which consists of raising from 1% to 2% income tax for medium enterprises with higher income. Another of the measures contemplated by the reform is to raise the income tax of large taxpayers from 1% to 3%.

See "More Taxes in Times of Crisis

Sergio Maltez, president of the Chamber of Industries of Nicaragua (Cadin), explained to that "... the reform itself as approved is not 'sustainable in time. In the case of the industrial sector we have had reports that there has been a reduction in employment between 30% and 35% as a result of this reform. There is an affectation in the part of the food security, because of the elimination of the exemption of the VAT to certain agricultural services and that increases the costs'."

Guillermo Jacoby, president of the Association of Producers and Exporters of Nicaragua (Apen), said that "... The reform increased production costs, and has a high cost for the country, a high cost for the population, employment and a very high cost for the future."

In spite of the fact that the country is currently evaluating the reform of the Tax Concertation Law, José Aguerrí, president of the Superior Council of Private Enterprise, said that the business sector is not invited to participate.

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Pessimism Over Tax Reform Review

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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.

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.

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Topics related to tax increases and the fiscal industry are to be addressed in the revision of the law.

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