COSEP reports VAT charge: tax expert Julio Francisco Baez: Government violates the Constitution and contravenes the World Customs Organization and WHO
By Yader Luna (Confidencial)
HAVANA TIMES – The Government of Daniel Ortega is levying taxes on three vital medical equipment items that are required to cope with the Covid-19 pandemic, —denounced the Superior Council for Private Enterprise (COSEP)—, which says tax benefits should be applied for the prevention of coronavirus.
The Government removed the exemption from import taxes on ventilators or respirators, key for severe patients of Covid-19, and levied an equal tax on ceiling or pedestal fans.
Surgical masks and oximeters (which help measure the level of oxygen in the blood), are the other two products that are paying new taxes, which represents a threat to the population that needs these medical supplies to face the pandemic.
Tax expert Julio Francisco Baez points out that other basic products to face the pandemic also continue to pay taxes, such as alcohol gel, chlorine, thermometers, among others.
“There is a collection psychosis of the Government, which shows that they do not have an orderly tax plan, as they apply the collection priority wherever possible, without caring for the health of the people,” said Baez.
The president of COSEP, Jose Adan Aguerri, regretted that the collection of these taxes “is making the entry of these products more expensive” when the business sector has been insisting since March “that what is needed is tax relief on everything that is useful to fight the pandemic.”
Taxes are illegal
Tax expert Julio Francisco Baez said the collection of these taxes is illegal because it violates several national laws, starting with the Constitution, but it is also “immoral” because they levy products necessary for health.
“It is impossible to think that they made a mistake and that they put medical ventilators on the same list as a common house fan and they are levying taxes on something that can save lives,” he said.
Baez specified that these charges violate article 114 of the Nicaraguan Constitution, which states that “medicines, vaccines and serums for human consumption, orthoses and prostheses, as well as supplies and raw materials necessary for the elaboration of these products in accordance with the classification and procedures established, are exempt from paying any types of taxes.”
He said they also violate article 127 of the Tax Concertation Law which established that they will exempt medicines, vaccines, oxygen for clinical or hospital use, and medical, surgical, optometric, dental and diagnostic equipment and tools for human medicine, from paying VAT.
This charge, insists Baez, violates the customs laws and contravenes the Central American Tariff System (SAC) applicable in Nicaragua.
Going against World Customs and Health Norms
The Government also goes against the World Customs Organization (WCO) and the World Health Organization (WHO) that prepared an extensive document called “Reference for the classification in the Harmonized System of medical supplies to deal with Covid-19,” in which they consider everything necessary to combat the coronavirus.”
Some products that the Ortega government is taxing, such as oximeters and medical respirators, are on this list, which, although not binding on governments, is a joint guideline of both world organizations that classify these inputs as necessary to confront and prevent Covid-19.
The heads of the World Customs Organization (WCO) and the International Chamber of Commerce (ICC) issued a joint statement on April 23 calling for further action on customs and trade facilitation measures, in order to guarantee an effective response to the Covid-19 pandemic.
Nicaragua has been a member of the WCO since March 3, 1998.
Why do they charge taxes on these crucial items?
Businesspeople say that the charge occurs due to the decision of the General Directorate of Custom Services to reclassify some tariff items, in the list of products that pay taxes including several that were previously exempt from the Value Added Tax (VAT).
“The ventilators that today are essential to save lives. Before this change, they were registered under an item where these ventilators did not have to pay the 15 percent of the Value Added Tax (VAT). Now they are doing a reclassification where they impose that the ventilator be put into another tariff reclassification that forces you to pay taxes,” explained Aguerri.
In this regard, businesspeople point out that this is due to a “need for tax collection” that “conflicts with the reality of saving lives, which is crucial at this moment.”
He also stated that now they are applying “value doubts” to surgical masks, which have increased their cost by up to 18% in the invoice price. This, said Aguerri, causes that even doctors, including those of the Ministry of Health (MINSA) who must buy them on their own, make it much more expensive.
Doctors warn of “collapse”
At least 34 Nicaraguan Medical Associations issued a statement on June 1, warning that the “exponential increase” in cases of Covid-19 has caused the “collapse” in the Nicaraguan public and private health system, which has caused: crowded hospitals, lack of beds, lack of medicines and of essential products such as oxygen.
This Thursday the Nicaraguan medical associations demanded that the Government give priority “to the common good, to the health of citizens” and required that they provide real data of the Covid-19 pandemic in the country, to counter its spread.
In their third public message, this time without signatures to avoid legal charges, dismissals or threats, the doctors expressed their “deep concern.” In May they published an alert call signed by more than 700 health professionals. At least 16 doctors have been fired by the authorities for expressing their criticism of the handling of the pandemic.
The president of COSEP called on the Government to be consistent because “everything has to be handled in order to support citizens, so that the situation that we are experiencing in Customs be reversed.
A Government with deaf ears
On March 12, COSEP asked the Government for tax benefits on products used to prevent the virus. It also demanded that the Government streamline the import and nationalization process of all these supplies, especially health.
A Confidencial investigation recently revealed that Nicaraguans have had to pay seven times as much for a regular surgical mask or an N95. The reason, in addition to the high demand of products to prevent the Covid-19 pandemic, is due to the lack of state measures that promote the lowering of prices, assured experts in consumer defense.
More than 23,000 artificial respirators have been purchased by nine Latin American countries since the beginning of March to equip the intensive care units of their hospitals and care adequately for hundreds of seriously ill Covid-19 patients who required them—or are expected to require them—as the contagion reaches its highest peaks.
The Alianza Centinela Covid-19 transnational journalism initiative, which is tracking how governments respond to the pandemic, examined 129 public procurement contracts for medical respirators use and their transport in nine countries. Forced by the eagerness to prepare as soon as possible for a potential massive demand for properly equipped ICUs, all the governments made their purchases under the direct contract modality, which according to the Open Contracting Partnership (OCP) organization increases the risk of irregularities.
Costa Rica and Uruguay were more cautious and went out earlier to buy, before device prices skyrocketed due to sudden simultaneous global demand. Colombia and Peru made multiple orders at different prices at different times, and others, such as Mexico, made a proportionally greater investment but ultimately obtained fewer ventilators.
Guatemala, the poorest country of those compared for this research, made some very expensive purchases, including three respirators for infants and newborn babies at more than US$100,000 each, despite the fact that those two groups are not among the population that is most frequently needing these machines to survive the virus in other parts of the world.
The research did not find any data on the purchases made by Nicaragua, where according to the Government there are 2,590 infections and 83 dead, while independent monitoring by the Covid-19 Citizens Observatory records 7,402 suspected cases and 2,087 dead, by July 3.
After 105 days of pandemic, without adopting any preventive measure or decreeing an emergency, the government of Daniel Ortega imposed a value tax (VAT) of 15% on the import of medical ventilators.