Home / Breaking News Headlines / Nicaragua: Steep pension cuts, tax increases could plunge country into recession

Nicaragua: Steep pension cuts, tax increases could plunge country into recession

Via Related Press

MANAGUA, Nicaragua — Nicaraguans revolted ultimate April when the federal government introduced it was once elevating payroll taxes and reducing retirement advantages to strengthen a social safety program hemorrhaging cash.

The unrest led government to briefly withdraw the measure, however because the protests boiled for months and broadened into calls for that President Daniel Ortega depart place of work, safety forces replied with a harsh crackdown that killed over 300 folks. Masses extra have been arrested and an estimated 50,000 fled into exile.

Now, with the dissident motion cowed, a brand new plan to chop pension bills by means of 30 to 40 % and a lift in payroll taxes is taking impact. And economists and businesspeople are caution that it threatens to have much more serious results for Nicaraguans and may just plunge the rustic into deeper recession and unemployment.

“This measure is actually a lot more drastic because it’s no longer sluggish however as an alternative instant, and it is going to have an effect on the just about 800,000 insured within the nation,” mentioned Mario Arana, who was once minister for building, head of the Treasury and president of Nicaragua’s Central Financial institution right through the 2001-2006 management of Ortega’s predecessor.

“All sectors of the economic system will probably be broken,” Arana mentioned.

The social safety package deal was once licensed in January by means of a legislature ruled by means of Ortega’s allies and took impact Feb. 1.

Companies with over 50 workers will see their social safety tax bills upward thrust from 19 % to 22.five % of pay whilst the tax on a employee’s wages will move from 6.25 % to 7 %. The tax on unbiased staff will increase from 18.25 % to 22.25 % of source of revenue.

On the identical time, the tax that finances incapacity, age and loss of life insurance coverage techniques is emerging from 10 % to 14 %.

That has folks like Mercedez Ramirez, who owns a good looks salon within the capital of Managua, fearful. Over the past decade, she has already noticed her clientele plummet and needed to lay off two of her 4 stylists. Now she doesn’t know if she will come up with the money for the social safety taxes for the 2 who stay.

“This case can’t move on,” Ramirez mentioned. “If I let my workers move I’ll have to near my industry after which … what is going to we survive? My kids are out of labor.”

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