Imports show inflation boosted Customs collections

The record collections registered by the State through the General Directorate of Customs (DGA) in 2022 were determined by the effect of inflation on the value of imported goods. The level of collection, while high, was lower than the proportion of increased imports of taxed goods. Customs collected RD$231 billion in 2022, representing a 20.2% increase over the RD$192 billion collected in 2021. However, the proportional increase in collections is less than the proportional increase in goods imports during the same period.

According to DGA statistics, imports totaled US$24.5 billion in 2021, up from US$24.5 billion the previous year, for a 26.8% increase. Ideally, collections should grow at a rate close to or greater than the rate of growth in imports, but this was not the case in this case, as Customs revenues were 6.6 percentage points lower than the imported level. The figures show that the increase in collections was due to the effect of inflation (price increases) on imported goods rather than increased efficiency in reducing tax evasion or other controls. The preceding is explained as follows: if an imported product costs $100 and is subject to a 10% tariff, the state’s tax revenue is $10. If the same product’s price rises to $150, with the same 10% tariff, the state’s income rises to $15, implying a 50% increase in collections, assuming there is no more than an inflationary effect at tax time.

This happened last year and should have been more effective because the value of imported goods increased by 26.8% while collections increased by 20.2%. To demonstrate efficiency, the proportion should have been the same or higher.