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Nicaragua Tax Reform
The Chamorro government instituted tax reform in July
1990.
New measures included lower tariff rates, lower income
tax, and
payment of tax in gold córdobas. The reform reduced top
tariff
rates from 61 percent to 20 percent and top income tax
from 60
percent to 38.5 percent. Collection of tax may have
increased
because of reduced evasion, but tax revenues, reported to
be 23.5
percent of GDP in 1989, fell to only 15 percent by 1990.
To encourage investment, the government eliminated a 2
percent export tax on coffee and cotton and lowered the
general
sales tax from 15 percent to 10 percent. The government
also
granted tax incentives for exporters of nontraditional
products
under a new export-promotion act. Like previous
governments, the
Chamorro administration announced it would extend
preferential
long-term credit for agro-industrial development.
Data as of December 1993
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