Santo Domingo.- The Dominican Association of Rum Producers (Adopron) has issued a warning about the potential risks and damages of increasing the tax burden on rum, especially as the industry continues to reel from the effects of the 2012 tax reform.
In a meeting with journalists and opinion leaders, economist Magín J. Díaz from Emod Consulting, along with Adopron spokesperson Circe Almánzar, presented findings from an exhaustive investigation into the fiscal situation of the rum industry. The study, titled “Dominican Rum: Current Tax Burden and Consequences of a Reform,” highlighted the adverse impacts of the 2012 tax hike on rum.
They emphasized that the 2012 reform, which significantly increased the tax burden on rum, resulted in decreased state revenues, an expanded illicit market, and health risks for citizens who turned to low-priced and unsafe alcoholic beverages.
“Specifically, following this reform, the formal industry lost one million cases, or 4 million liters. Selective Consumption Tax (ISC) collections in 2016 were lower than in 2011, and it took the government six years to control the illicit market and fraud. Essentially, the state, the industry, and consumers all lost,” Díaz stated.
Díaz noted that it wasn’t until 2021 that government revenue collections reached the levels of the 2011 ISC, but the rum industry still hasn’t recovered to the sales levels of 2012 due to the long-lasting impact of the reform.
Both Díaz and Almánzar stressed that further increasing the tax burden on rum would be highly detrimental, especially considering the total revenue from alcoholic beverages has declined over the past two years, reaching the lowest level in 2023 in two decades.
According to the Emod Consulting study, the current tax burden on Dominican rum is the highest for alcoholic beverages in the region, nearly double the regional average. This excessive pressure impacts both producers and consumers.
“Low-income consumers have been the hardest hit, with the current average tax burden on rum reaching approximately 60% in the low-price segment. This regressive tax impact has driven many Dominicans to cheaper and lower-quality alternatives, endangering their health and safety,” the research highlighted.
Almánzar added, “Further increasing the tax burden on rum could have catastrophic consequences for the industry, the state, and consumers. The demand for rum is highly elastic, meaning any tax increase could lead to higher evasion and a stronger illicit market.”
“We must protect our industry and consumers from excessive tax policies that exacerbate existing problems. Dominican rum, a symbol of our cultural identity, must not be brought to the brink of disappearance,” Almánzar urged.
Adopron called on authorities and the public to consider the implications of any new tax reform on rum, stressing the importance of finding a balance that sustains the industry, protects consumers, and ensures tax revenue without encouraging the illicit market.
The Dominican Association of Rum Producers (Adopron) was established in 1978 and includes key companies such as Casa Brugal, Barceló & Compañía, Isidro Bordas, Bermúdez, Vinícola del Norte, Yazoo, Don Miguel, Alcoholes Finos Dominicanos, Siboney, and Methuselah.
The rum industry is one of the largest taxpayers in the nation, contributing over RD$7.2 billion in taxes, with RD$5.5 billion from the Selective Consumption Tax (ISC). Annually, the industry purchases more than 2 billion pesos worth of goods in the local market.
Adopron represents an industry that significantly contributes to the national economy, producing approximately 6 million cases of rum annually, with over 2.5 million cases exported to demanding international markets such as the United States, Spain, Italy, Russia, Japan, and Chile, reaching more than 75 countries worldwide.