Ortega’s Dictatorship Is Financed by Tax Extortion
The state machinery of the DGI (tax office), Customs and City Halls is designed to blackmail and punish companies, businesses and commerce in Nicaragua.
HAVANA TIMES – The narrative of Daniel Ortega’s regime portrays a Nicaragua in which financial goals are being met, but the reality reported by businesspeople is that they live under constant scrutiny of an intense extortion campaign, led by the Tax Office (DGI) and Customs (DGA), and City Halls also participate, especially the Managua Mayor’s Office.
Many executives continue to resist the fiscal harassment to which they are subjected by the regime, in an attitude that those affected, and their association leaders do not doubt to label as voracious tax collection.
This situation forces business owners to elaborate “priority lists,” to help them decide who to pay first: their workers, their suppliers, the banks, their partners…or the tax authorities, to such a point that they often feel that they work and produce only to pay taxes, which in the end becomes a disincentive to continue investing in their businesses.
The load is even heavier for those who, besides having to pay high tax burdens, also must pay fines or bribes to reduce fines that should never have been imposed. With the aggravating factor that they have very little expectation that the Customs and Administrative Tax Court, will rule in their favor, no matter how much evidence they present…except (sometimes) in cases that do not exceed 5,000 dollars.
A false reality
The government joyfully divulged that up to the third quarter of this year, the Ortega administration had collected 84.4 billion cordobas, according to the Budget Execution Report from January to September 2022, prepared by the Ministry of Finance and Public Credit. This amount is equivalent to 99.4% of the annual budget and 131.9% -or 20.4 billion in excess- of the target for that period, which in turn is equivalent to 13.8 billion cordobas more than in the same period of 2021. (Note: 35 cordobas = 1 USD)
According to the Treasury Ministry, reaching these figures was possible thanks to the positive evolution of the internal macroeconomic context, emphasizing the growth of the economic activity in the period up to September 2022, “which has led to a good performance and great dynamism of tax collection.” But the reality told by businesspeople is another story.
Confiscating efficiency
The fiscal harassment carried by the DGI allows the regime to increase its tax revenues, and to “reward” the most faithful, by allowing them to keep a part of the ill-gotten gains, while attacking the private sector— whom they call “traitors” for turning their back on them in 2018 when the Ortega-Murillo government decided to fire on unarmed crowds demanding freedom.
If in the 1980s, Ortega made the mistake of confiscating the means of production, now (besides confiscating universities and banning NGOs), he is confiscating profits, instead of nationalizing companies, which would bankrupt the government… as in the 80s.
The DGA also does its own thing, not only by making changes that indicate whether the merchandise enters the country without revision or not, so that most of the time the light turns red. But also applying value doubts arbitrarily, regardless of the evidence provided by importers, affecting —for example—agricultural producers, who have had to pay taxes on purchase prices higher than those found in the international market.
The importers also do not have much hope of getting the authorities to rule the appeals in their favor, especially when they consider that customs are the fiefdom of Oscar Moncada Lau, one of Daniel Ortega’s most trusted men.
The circle is closed by the municipalities, which levy taxes for periods and amounts greater than those conferred by law. This has led to arrests and criminal trials against those who decided that they were going to fight legally, because they felt that they were right, which ultimately prolonged the crisis of the real estate sector, which sees how the municipalities tax some purchases and sales with exorbitantly high rates.