Instituto
Henry George ...
Apartado Postal SL-145, Managua,
Nicaragua
ihg@ibw.com.ni
|
Instituto
Henry George ... |
PROPOSED TAX LAW FOR NICARAGUA, written by the IHG and submitted to the Economic Commission of the Nicaraguan National Assembly on July 1, 2002.
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LVT Tax Plan for
Nicaragua (v. 1)
(versión 2
en Español)
Proposed Tax System
The purpose of the proposed tax plan is to transfer the tax burden onto the value of monopoly inherent in the sovereign patrimony of the nation (rents of land, natural resources, and natural monopolies), and at the same time, eliminate the taxes on productive activities such as agriculture, industry, commerce, etc. (already in practice in the Free Trade Zones or Zonas Francas). This is effectively the nationalization of the tax power that already exists in those privatized rents, and the recognition of the universal right to exclusive private property of the product of human effort.
Changes Resulting from this Proposed Tax System
The results of taxing the value of land and natural monopolies and of liberating Nicaraguan production from the tax burden includes: opening to all Nicaraguans the opportunity to employ the most profitable lands and natural opportunities in the country; raising the minimum wage of agricultural producers (and consequently, all other wages in the nation); encourage migration to the most advantageous strategic lands for production and social participation (more concentration[1] around the urban centers); lower the total cost of urban, suburban and rural infrastructure; lower prices of all consumer products and industrial inputs; increase public funding with each economic step forward of the nation.
Administration of the Land Value Tax (LVT)
Assessment: A professional firm or team of qualified professionals (of good reputation and without family ties or economic interests in the region) would be contracted to make an objective assessment of the value of: 1) urban, suburban, and rural lands in the whole territory of the nation, beginning with the urban zones of the largest cities; 2) concessions of monopolies of basic services such as water, electricity, telecommunications, radio frequencies, air space, etc.; 3) deposits of minerals and petroleum, lumber forests, and other natural resources that can be economically exploited. This process is objective and based on technical market evaluation techniques. It is relatively inexpensive and can be realized in a few months.
Stage #1: Potential public income from a 20% tax on the assessed value of land and other elements of monopoly is calculated. A tax of 20% of the assessed value of land, the real value of concessions of privatized monopolies of basic services (electricity, telecommunications and radio frequencies, mines, etc.), and other natural monopolies is applied and collected every three months. After six months or collecting the new tax, the equivalent rate/amount of taxes is eliminated, preferably those with greater administrative cost and most disincentive to consumption and production (IGV, IBI, etc.).
Stage #2: Potential public income from a 40% tax on the assessed value of land and other elements of monopoly is calculated. The Land Value Tax is raised to 40% and its collection is expanded to suburban lands and other forms of natural monopoly that have been pending assessment in the first stage. The tax is collected every three months. After six months of collections, the equivalent rate/amount of taxes on production and consumption are eliminated.
Stage #3: Potential public income from a 60% tax on the assessed value of land and other elements of monopoly is calculated. The Land Value Tax is raised to 60% and its collection is expanded to rural lands. The tax is collected every three months. After six months of collections, the equivalent rate/amount of taxes on production and consumption are eliminated.
Stage #4: Potential public income from a 80% tax on the assessed value of land and other elements of monopoly is calculated. The Land Value Tax is raised to 80%. The tax is collected every three months or as convenient. All remaining taxes on production and consumption are eliminated.
Stage #5: Potential public income from a 95% tax on the assessed value of land and other elements of monopoly is calculated. The Land Value Tax is raised to 95%. The tax is collected every three months or as convenient. The LVT is maintained at 95% in order to maintain an economic incentive for private administration of lands. [2]
Notes:
Each stage of the plan would last long enough for the adjustment the economy and the study of the results, for example, 1 or 2 years.
The rate of increase of the LVT and the elimination of taxes on production can be adjusted, but the rate must be sufficient so as to be a disincentive to land speculation, and no so high as to run the risk of interrupting the flow of public funds. The periods of payment can be adjusted according to what would be feasible for the efficient collection the tax.
The terms of collection/payment should include clear clauses of consequences for those who do not pay the tax. Suggestions: Add interest to the tax for payments past due, up to a period of six months; then initiate a process of legal confiscation of the land and the improvements and wealth occupying the land. Such a process of confiscation should be realized y executed within a brief period. The confiscated land can be put back into circulation via public auction at a price established by its market value.
A rational plan for the elimination of taxes on production should be formulated. It is best to first eliminate such taxes that most impede labor intensive production, limit consumption, and are least efficient (most costly to collect relative to the tax collected).
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1. Editor's note: This would be a rational concentration, not a desperate overcrowding.
2. Editor's note: Land and all monopoly values would be reassessed periodically and the LVT adjusted in accordance with the development of the nation.
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What
do Nicaraguan's think of the LVT once they have taken the IHG CE
course? . . . 
See CE Petition.
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