Commitment for Life – A taxing issue in Nicaragua

CENTRAL AMERICA –  Nicaragua

I was struck recently by the story in the press about Starbucks, who have avoided paying tax in the UK. The subsequent public outrage at the injustice of this and the consumer power of potential boycotts of Starbucks coffee shops, led Starbucks to backtrack and review their tax arrangements.

I feel grateful at how lucky I was to live in a country where it is generally accepted that it is morally right to pay our taxes and trust a large portion of this tax revenue will be used to fund public services such as health and education. I reflected in a meeting we had in a small, hot and humid office in Christian Aid headquarters, Managua, with Professor Anderson and Claudia Teran Mendieta on our first full day in Nicaragua. These passionate and dedicated people represent two organisations that Christian Aid partners with, the ‘Civic Network’ and Institute for Strategic Studies and Public Policies’, IEEPP. Professor Anderson told of Nicaraguan society, in which 80% of people worked in the informal sector, in which enterprises paid little tax and workers had no pension or employment rights. Children in urban areas received only seven years education, in rural areas it was as little as three years, compared to eleven years in the UK. Much of the country does not have access to clean water or sanitation, resulting in many health issues. Investment is the lowest in Latin America.

The Nicaraguan government have had very limited funds with which to resolve these issues and invest in a public infrastructure. This is in no small part due to large and rich Nicaraguan and multinational companies avoiding paying corporation tax. These companies are not doing anything illegal, they are merely taking advantage of free trade zones, tax breaks used to attract them and clever accounting practices. This means that the government’s tax burden largely falls on the poor. The result is a massive reduction in income that the Nicaraguan government has at its disposal to invest in health and education.

The IEEPP is an autonomous think tank dedicated to generating dialogue on public policy issues such as citizen security, fighting organised crime , health education and social inclusion. Much of this work involves research and statistical analysis which underpins policy advice and advocating for social change. The Civic Network provides a space where different networks can come together, advocating local democracy, women’s rights and small co-operative support groups. Their aim is to transform the country into new ways of thinking.

One project the Civic Network has been engaged in is working with thousands of people across the country holding local public meetings to promote a new, progressive, more just tax system. They are attempting to educate, engage and empower people, especially young people, to challenge the system and hopefully not just bring about political change but a change in public attitude so that one day, like many people in the UK, they may feel moral outrage and exert public pressure on their Government and multinational companies.

©Ian Maitland, The Congregationalist: Issue 88 used by permission

Author: David Wiggs

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