Tax Reform with more rejections than positions in favor

Santo Domingo – The prediction and logical reaction against those who would receive on their backs the onslaught of new tax burdens are fulfilled without the fiscal reform project lacking consonant or conciliatory assessments to overcome the acute deficit condition that, in view of low revenues and the quality of spending, keeps the Dominican Republic in the first place in the Americas. Arguments that it would hurt those with less would be much more difficult to refute.

But there they are, apart from the applause by the “superior order” of cabinet members and tourists, the appeasement, approving or equidistant views that are concentrated between the pros and cons and even those who sleep peacefully because they believe that essential and authoritative objections exert enough pressure towards consensus. Those who do not shout do not manage to suck udders, and the “steamroller operation” will probably go into recess after the “backstabbing” of the constitutional reform.

The reins of experts and representatives of potentially affected sectors summoned by the national press reach the very core of the project that must give way to new taxation and received mostly without confidence in its feasibility: it omits the objective of combating evasion, ignores informality, there would not be enough administrative resources for implementation, and it is regretted that it sets aside the priority of reducing public spending and making it efficient. One of its worst characteristics would be falling too heavily on the middle class.

The Association of Young Entrepreneurs (ANJE) is concerned that, in its opinion, the purpose of fiscal modernization appears to turn its back on the principles of integrity, equity, and consensus with all sectors initially raised, while at the level of consumers with lower purchasing power, it is irritating that the intention to generalize with a tax of 18% is underway. Based on a reinforced Itebis, most items in the food basket are not currently taxed. With a change of name and all, because from now on it would be called VAT or Value Added Tax, the mere evocation of the acronym generates gloomy forecasts for people with minimum wages, basic and those who belong to the class placed between those who have a lot and those who lack much.

THICK ARTILLERY

The union that represents the industrialists and the energetic spokespeople of Tourism and Free Trade Zones have spoken with alarm and predictions that their competitiveness would be reduced if the tax cuts wielded by the Executive Branch with the elimination of exemptions are approved. The Francoist zones declared themselves virtually unable to compete under the proposed rules with other countries that attract investment—a blow against the installation and survival of companies and the creation of jobs.

On the first reading of the draft text, the Association of Industries of the Dominican Republic found what it called “a certain bias” against the manufacturing sector and recalled that Organic Law 1-12, which outlines the National Development Strategy, conditions institutional changes to the prior signing of a Comprehensive Fiscal Pact as a result of a consensus between political forces, economic and social. He is amazed that there are still no feasibility analyses that guarantee the achievement of the collection objectives being pursued.

Meanwhile, the consortia of the industry without chimneys affirm that investments in their sector would stop after the elimination of the tax exemptions granted by Law 158-01. The treasuTreasuryf would experience a reduction in income in the order of US$780 million towards the end of these four years while calculating that by then, 173 thousand jobs would have been lost. The drop in revenues would occur if, as they fear, there is a flight of 50% of foreign investment in tourism.

The rejection of the Government’s disconcerting inability to collect the existing items (the most acutely evaded burden along with the Income Tax) is standing by changing the label of the collection mechanism to VAT from now on and immediately placing higher taxes on consumption to generate the bulk of its revenues that are its “promised land” at this time. The truth is that under the current regime, more than 340 billion pesos a year stopped entering the TreasuTreasury CRAVE FLEXIBILITY.

In recognition of the state’s importance of obtaining additional resources, the National Council of Private Enterprise, CONEP, located at the forefront of the sector, yesterday advocated for a broad and constructive dialogue in achieving tax reform and called for identifying opportunities to improve the project with the opening of a forum chaired by the Ministry of Finance. He reiterated his willingness to comprehensively focus on the proposed changes “so that they contribute to the construction of a sustainable and resilient Dominican Republic.”

From a public opinion shaken by the arrival of the fiscal “Modernization” project, voices arose to guide what the newspaper El Caribe considered in an editorial as convenient to the national interest: “Weigh widely (the proposed measures) and open spaces for discussion.” He acknowledged that the government’s Government accounts for the country’s future. The newspaper El Día highlighted the positive: the project eliminates most tax exemptions. Still, it simplifies aspects of tax administration, and he said he is confident that this line of action will consolidate and prolong the stability that the country has experienced.

The evening newspaper El Nacional warned, “The authorities will have to listen to claims from the tourism, textile, and film industry sectors whose exemptions would be eliminated.” He expressed concern about the possible application of a 27% tax to those earning income from 200 thousand pesos per month onwards. This newspaper said that it should reach a consensus by tracing “a clear path towards the austere use of resources with a reduction in current expenses that the next budget execution would not visibly guarantee.”

VOICES IN FAVOR

The incisive critic of the strategies and weaknesses of the collection action, Magín Díaz, former director general of Internal Taxes, described the fiscal modernization reform submitted by the Government as Governmentally correct. “It has been adjusted by eliminating some aspects by taking into account that there are important macroeconomic reasons that would justify its implementation.” And he described it as challenging that a reform of this type is sponsored in the current political context. “I believe that no sensible economist would think otherwise because it is a technically correct reform.”

Economists Jaime Aristy Escuder and Isidoro Santana, quoted by the newspaper Diario Libre this week, recognized the need to lead the Dominican Republic to fiscal reform. They affirm that the government’s aspirations to collect more are moderate. The government only seeks to raise 122 billion and “needs much more.”

Santana, former Minister of Economy, Planning and Development, was specific in expressing that: “in general so far what is known seems to me to be very much in line with what was expected. In fact, it is much less than what is needed because the reality is that the government Governmente a much more ambitious reform.” In his opinion, this would not be enough to face the country’s problems with a fiscal deficit of 3.1% of GDP.

Escuder stressed that this “rampage is also received by the rich. Let’s set the record straight. It’s the first time I’ve seen since Balaguer in 1992″ that someone completely takes away a system of tax benefits for the upper class.

Pablo Mckinney, who has a notable critical presence in the Dominican media, assessed the tax reform project as follows: “It is about governing responsibly and being willing to pay the price. It would be petty to prevent someone from leading to success what others could not lead to even failure. Then go ahead, sharpen your aim (Mr. Government), and may God inspire you and Mary Magdalene protect you and welcome you in her unholy bosoms. Amen.”

From this rostrum, it is added: Based on timely decisions, Luis Abinader’s lines and curves show the poverty of resolution manifested by some of his predecessors who remained silent in the face of the challenge of putting the country in order in tax matters.