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Article Excerpt
For the sixth time since 1997, and the third time in less than a year, a tax-reform package was being considered in the Nicaraguan Asamblea Nacional (AN). This latest, the third to be sent to the Asamblea by the government of President Enrique Bolanos in seven months, had the potential to raise taxes for some sectors to the highest level in Central America. The package is designed to comply with the demands of the International Monetary Fund (IMF), pursuant to an agreement signed last December (see NotiCen, 2003-01-30).
The proposed taxation schedule would, according to analyst Julio Francisco Baez, increase collections by at least 1% of GDP, or about US$25 million. The aim is to reduce the public deficit, currently calculated at 12.5% of GDP, estimated at US$2.56 billion in 2002.
But these fiscal benefits come at a price. "The reform comes at a time of economic contraction for Nicaragua. New taxes amplify the regressive nature of the taxation system in the short term, which will cause a reduction...
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