Tax reform will cost the population between 10% and 20% of their income, says Juan Ariel

The economist and Harvard University professor Juan Ariel Jiménez said that the tax reform presented by the government a few days ago will cost Dominicans between 10% and 20% of their income.

In an opinion article published in national media, Jiménez explained that in the breakdown of taxes in the first place, the Dominican family is affected, which will spend around 21,861 pesos more on their supermarket purchases next year, because essential products such as pork, beef, coffee, and many groceries will pay an 18% ITBIS, while sugary drinks, such as orange juice and malt, will now have a higher selective tax. In addition to this, taxes on alcoholic beverages will also increase.

“In addition, thousands of families who today do not pay the Real Estate Property Tax (IPI) will have to start doing so, disbursing up to 48,353 pesos a year. Additionally, for each vehicle in the home, between 1,500 and 3,000 pesos additional tag cost will be paid, so a household with two vehicles will have to pay up to 6,000 pesos per year more in taxes,” he explained.

On the other hand, the economist referred to digital services such as online purchases and platforms, which will force Dominicans to pay approximately 3,191 pesos a year.

“This reform represents a very hard blow to the Dominican pocket. A middle-class Dominican family will see an increase in their expenses of between 54,844 and 103,865 pesos next year just because of tax increases. Seen on a monthly basis, this tax reform will cost between 4,570 and 8,655 pesos per month to the Dominican middle class. If we consider that a middle-class family earns around 56,000 pesos a month, we are talking about a reduction of up to 15% in their purchasing power,” he said.

The professor pointed out that the increase in ITBIS could be avoided by reducing unnecessary public payroll and losses in the electricity sector, reducing the cost of government advertising, and eliminating parties and government events, thus saving more than 205 billion pesos a year.

“The discussion of the reform should have begun with the objectives that it seeks, because it is not true what has been meant that this reform was inevitable, at least not a reform like this one that seeks to allow the government to increase public spending. Instead of discussing a reform that will cost the average Dominican almost 20% of his income, it would be much better to discuss effective mechanisms to reduce unproductive public spending and reduce evasion,” he added.

He said that, at the end of the day, the question is not just how much longer the middle class can endure but also how much longer Dominicans are willing to accept that the government continues to look the other way when it comes to its own spending.