Fiscal policies should benefit poorest Dominicans: World Bank
Santo Domingo. – A World Bank report releasedThursday suggests that the Dominican Republic can eradicate extreme poverty throughimprovements in fiscal and social policy.
The study entitled "Fiscal andredistribution policy in the Dominican Republic" indicates that anadditional expenditure of 1.3 percent of GDP to double the transfers to the poorestand achieve universal health coverage and public education even administrativereforms, the Caribbean country can achieve that all Dominicans rise above theextreme poverty line.
"To achieve this, the report considersessential to review fiscal policies focusing on administrative measures toreduce tax evasion and reduce informality. It also suggests a review ofelectricity subsidies to ensure that benefit those who need it most," thereport says.
"The World Bank analysis confirms thatthe Dominican Republic is on the right track, limited only by the achievementsin social terms, and contributes to our plan in this new period of implementingreforms aimed at improving the delivery of public services to the populationand make more equitable economic growth," said Dominican Economy minister IsidoroSantana.
Over the past three decades, the DominicanRepublic has been among the fastest growing economies in Latin America and the Caribbean,the World Bank notes. "In fact, in 2014 and 2015 it was the economy thatgrew an average of 7.2 percent and is forecast to continue robust economicgrowth in 2016, about 6 percent."
"But despite the considerable efforts ofthe Government to increase social spending in recent years, a limited revenuecapacity has restricted the scope of its policies keeping deficiencies in theprovision of public services that reduce their impact on levels of poverty andinequality."
"One of the main challenges for theDominican Republic is to broaden the fiscal space, maintaining theprogressivity of the system. In this context, the next Fiscal Pact offers aunique opportunity to address reforms to strengthen fiscal sustainability andachieve better results for equity and poverty reduction," said AlessandroLegrottaglie, World Bank representative in the country.
The report suggests priorities to close theequity gap:
· Reforming the system of indirect taxes,focusing on tax exemptions Transfer of Industrial Goods and Services (BITS),the main VAT of the Dominican Republic, which benefit mostly middle and upperclasses and accounting for 3% of GDP from 2013.
· Reforming electricity subsidies andprograms such as Bon-gas and Bono-luz, retaining those that benefit thepoorest.
· Increase subsidies that benefit the poorsuch as Eating is first, Incentive for school attendance and health services,avoiding creating new ones.
· Continue implementation of therecommendations of the Pact for Education to improve quality.