Abstract:
This paper examines the mobilization of domestic resources for social development in Nicaragua, analysing the fiscal system, its main tool. The main argument of the paper is that many tax reforms that have taken place in Nicaragua since the 1970s have been motivated mainly by the objective to increase revenue collection. However, through all the periods studied in this paper, higher revenue levels have not necessarily translated into higher social spending, as the latter has fluctuated throughout the different time periods. This results from power relations that determine the economic and social effects of the different tax reforms, more specifically, tax burdens, winners and losers, perpetuating an unequal system of wealth and income distribution in Nicaragua. [...] The main focus of this paper is on the Ortega administration (2007 - present) in terms of tax revenue collection vis-à-vis social spending, focusing on the most recent tax legislation: the Tax Concertation Law. This section elucidates the power dynamics that shape tax legislation through processes of contestation and bargaining, giving way to winners and losers from the new tax reform. Furthermore, trends on revenue collection and social spending are examined, emphasizing the shortcomings of the Tax Concertation Law, the low levels of tax revenue collection, and its implication for the politics of domestic resource mobilization for social spending. The paper concludes that the revenue collected is not sufficient to support higher levels of social spending. Therefore, changes to the tax legislation and administration could potentially improve the ability of the government to mobilize further domestic resources destined to the public sector, thus improving social development.