Will PLI put their money where their mouth is?

After pledging allegiance to Nicaragua’s Constitution and swearing in last week as national lawmakers in the new National Assembly, the 26 opposition congressmen and women and their respective substitutes from the PLI Alliance face a singular dilemma: to profit sneakily from three illegal economic provisions that have been enjoyed greedily by previous congressmen (with a few honorable exceptions), or publically denounce the situation and fight to have these illegal “benefits” eliminated.

I am referring to the piggish appetite of lawmakers, which the opposition candidates criticized so hardily during the campaign. Now that the spoils of government are laid before them in the National Assembly, how tempted will the opposition be to feed from the same trough and happily stick this money into their pockets? Will they too be seduced by the economic privileges of power?

Let’s look at the benefits that opposition lawmakers who promised change now enjoy in the National Assembly:

 

     1.     Echoes of somocismo: “las libres”

The first case of economic benefits granted to lawmakers is known as “libres”, which are de facto exonerations given to lawmakers to import vehicles or buy new ones from local dealerships as personal property. This fiscal abuse is even worse than those committed by lawmakers during the Somoza era.

The exoneration was legalized during the administration of Arnoldo Alemán through the “Law of Tax and Commercial Justice (1997),” but later abolished by the Law of Fiscal Equality of 2003. However, in December 2006, in the waning days of the Bolaños Administration, lawmakers again tried to sneak this odious special tax treatment back into law by incorporating it as contraband tucked into the Organic Law for the Legislative Power. But the law was never properly enacted through “reglamentos,” or the regulations that specify how legislation is to be applied. As a result, the “libres” are illegal, but lawmakers continue to benefit from them anyway!

This “tax window” covers 180 national lawmakers in the National Assembly—90 lawmakers who are allowed to import two tax-free vehicles and 90 substitute lawmakers who are allowed one each. This dandy exemption is also extended to the 20 lawmakers of the Central American Parliament (Parlacen) and their respective substitutes. In total, that’s 220 lawmakers who are provided this dubious tax exoneration that costs the state no less than $4 million over a five-year period.

 

     2.     Income tax evasion

Without any legal basis, the National Assembly gives each lawmaker 200 gallons of gasoline each month to “attend to the obligations of parliament.” When that’s all added up, it means 90 lawmakers are getting 260,000 gallons of diesel and gasoline each year.

Let’s suppose for a minute that the unpredictable magician David Copperfield were able to pull some miraculous law out of his hat to justify this petroleum giveaway. Even if it were legal, it should still be taxed under Articles 5 and 7 of the Law of Fiscal Equality, which says that any income received in-kind constitutes an added value subject to income tax.

So why, in addition to their monthly salaries, do the lawmakers not pay income tax on the value of 200 gallons of gas and diesel valued around $900?

This is a serious tax evasion sanctioned under the Penal Code under Titles IX and XIX.

 

     3.     The 40 million cordoba fiesta

For more than a decade, the National Assembly has given each lawmaker 430,000 córdobas per annum ($18,695 by today’s exchange rate) in discretional funding to handout as “scholarship funds or social aid.” That adds up to 40 million córdobas ($1.7 million) a year in slush-fund spending, without any controls or oversight.

Needless to say, there is no law or argument to justify this congressional piñata.

Let’s assume again that the intrepid David Copperfield were to pull out of his sleeve a forgotten law titled “The Law of Scholarships and Community Aid for Lawmakers with a Tidy Accountability.” Guess what? That law would be illegal because the Constitution prohibits lawmakers from carrying out official functions that are not specifically covered by the 32 points of Article 138, which defines the function of lawmakers. In fact, it’s so prohibited that it’s mentioned twice in the Constitution, under Articles 130 and 183.

 

In conclusion, those who criticized their political adversaries during the campaign must behave consistently once they are elected. The opposition is obliged to fight abuse from the beginning by putting an end to these constitutional violations and unseemly privileges as a matter of principle.

Who would be able to respect and confer credibility to the new opposition legislative bloc if once elected to National Assembly they quietly enjoy the same illicit financial cake that all the rest of us pay with our taxes?

I want to think that opposition leader don Fabio Gadea, who campaigned on a platform of honesty and propriety, would say: “That will never happen!” And I want to think that the lawmakers elected on his ticket’s alliance will unanimously reject such illicit fruits of congress.

It reminds me of the anecdote of the man who asked Mother Teresa of Calcutta how far he should take his commitment to social justice? And Mother Teresa answered: “Until it hurts, my child. Until it hurts.”

 

Julio Francisco Báez Cortés is a tax lawyer and founding director of the firm Báez Cortés & Asociados and of the Nicaraguan Institute of Investigation and Tax Studies (INIET). He is the coauthor of the book Todo sobre Impuestos en Nicaragua, 8ª. edición 2011. (Everything About Nicaraguan Taxes).

  • Nick

    They WILL eat the swill in the trough. And they will use their positions to favor friends and relatives. It’s the name of the game. Not politics… merely opportunism.

  • arturo

    Great piece! However, I think your target should be different, since it was exactly those people in the PLI and the PLC who created these loopholes and unaccountable give-aways. What we all need to do is pressure all the representatives to adhere to the constitution with respect to taxes and expenditures, in addition to pushing for a more progressive tax code.