Tax Reform in DR is Coming Soon

Dont be asking for more taxes,  ask everyone to pay their share as appropriate!   The  underground economy is huge here. They have been  poking away at it but the loss of  tax revenue is huge. If everyone paid what is  reasonable based on income then  much of the shortfalls would disappear!

And of course this gov't said they would be doing this. They campaigned on this as well.  It will be interesting to watch how it rolls out.

He added that "as we are more efficient spending, we have a higher level of credibility in asking for the support of citizens."

He pointed out the need to have better control and management of expenses, in order to request higher collections.

We are seeing that from this government with the elimination of 'bottelas' - people on the public payroll as a political favor but doing nothing, major corruption cases being persued - the latest one Coral is quite staggering in its reach and elimination of duplicated and inefficient public bodies to mention a few.

But now we have:

Public employees will have to take a mandatory ethics course to be in the Government

The Government also presented the Code of Ethics and Integrity Guidelines for Public Procurement

https://www.diariolibre.com/actualidad/ … CM25926163

President Luis Abinader announced this Thursday that, from now on, for a citizen to be part of the government train, or remain on it, it will be a requirement to have completed the Basic Ethics Course for Public Servants.

In a joint resolution between the Ministry of Public Administration (MAP) and the General Directorate of Government Ethics and Integrity (Digeig) they indicate that this training will be essential to access, remain and develop in public positions.

Bottomline is that when the masses are well aware of the systemic corruption by those in power, not paying any taxes on their illicit plundering, there's a natural tendency to evade taxes levied.
I come from a third world country now in the developed status.
It's still governed by Kleptocrat leaders who steals in the multi billions. I am talking about Malaysia.
Western governments / though better - are still ruled by governments that let their cronies steal massive amounts - such as Canada where I presently live.
Billions of contracts to procure PPE equipment are given (not tendered) to Trudeau's cronies / who have zero experience in business or operating procurement businesses - and sells to the Canadian government at overpriced markups.
It's sad.
But also reality.

Luis Abinader: "Public officials who do not comply with the code of ethics who resign"
https://www.diariolibre.com/actualidad/ … JM25928504

President Luis Abinader urged public officials not to adhere to the code of ethics, signed this morning in the National Palace for the exercise of public function, to resign from their positions, and assured that in his government there will be no sacred cows.

The president said that "he will not allow or protect any attack against the principles of efficiency, objectivity, transparency and equality that govern the actions of the public administration."

Abinader launched the Basic Ethics Course for Public Servants, which public servants must pass to enter and remain in their functions.

He indicated that the agents of the military corps must also undergo such training, regarding the recent case of corruption that the Public Ministry investigates, and that involves senior officers of the uniformed corps.

The "Code of Ethics and Integrity Guidelines for Public Procurement" set out the principles that public servants must observe when interacting with the National Public Procurement System.

Present were Milagros Ortiz Bosch, General Director of Government Ethics and Integrity; Darío Castillo, Minister of Public Administration; and Mauricio Ramírez Villegas, resident coordinator of the United Nations development system.

This country is riddled with corruption in public service from the top to bottom so it is refreshing to hear this from the man at the top.

Banson -  I understand your points and  agree with them.  This gov't must lead by example.

lets hope what they are saying will match what they do!

Doesn't the ITBIS help support everything? Lack of tourism will hurt that.

I did notice inflation starting to kicking in on food and related costs,

Sure ITBIS helps.  But it's not enough.

Inflation is an issue as pay levels don't keep up.

We also tend to lose on exchange rate issues.

One hundred percent true. Corruption is the curse to all governances. Particularly when coupled with serious wealth distribution countries. So sad that ones destined perpetually to a life of futility when born from the wrong wombs, and in a thoroughly corrupt state.

It is very hard to watch!

This is interesting to watch, as a "new guy on the block."

Hopefully, DR will proceed to enforce its tax laws, legally and equitably. 

I'm a strong conservative, and thus automatically am suspicious of any new/added tax. 

OTOH, as a strong conservative, I also believe that some level of taxing is necessary to ensure the critical functions of government -- but none other -- are performed, and performed well.    I have no problem with paying such taxes, and expect others to do the same, if they want the privilege of living in the society they've chosen to live in.

Got no slack for scofflaws and tax cheats.   As long as the taxes are fair, reasonable, and applied equally among all. 

But the flip side is also true.  If taxes are not fair, reasonable and applied equally among all, then I've got a serious beef with the government.

Personally, I hope the DR government is sincere and will proceed accordingly. 

However, all of us "of a certain age," have all too often seen governments polish up a tax or or other legislative proposals with some new rules, a minor reform here or there, and LOTS of promises made as a condition of the new/higher taxes...only to see the promises fade away and disappear like the morning fog.  Leaving the successful, honest people to bear the brunt. 
>>  Let's hope it doesn't happen in the DR's case, this time. 
>> If it were to happen, it would surely impact our downstream decision as to whether to make the DR a permanent home. 

All governments have some degree of corruption.  But the ones that operate at the level of grand larceny cause the public to lose respect for the laws, and that leads to a public willing to foment a revolution. 
>>  Not the optimum path to follow.

We are mired in corruption and blatant theft and have been for years and years.

As expats we literally have no say in how things are done. 

We hope the new govt means what it says!   Years of corruption has created a massive distrust here.  If politicos can steal why can't I?  That's the attitude.  The rich steal every day. Why can't I?  Enforcers of the law are bought and paid for. Why can't I then steal the electricity, steal the cable etc etc. 

There is little respect for the law here. 

All this needs to change.  It will be a long process of small steps.  What we have seen so far from this govt is more than talk.  It appears they are actually making changes.  Let's see how effective they are.

Here is a recent article which explains the background to the need for tax reform:

Tax reform in sight: The Government sets its target for 2021

Tax pressure in the Dominican Republic, among the lowest in the region

https://eldinero.com.do/132129/reforma- … para-2021/

The tax structure of the Dominican Republic will be reviewed in 2021. The Government has already made the decision. At least two officials of the highest level have referred to the issue: Lisandro Macarrulla, Minister of the Presidency; and José Ignacio Paliza, the Administrative Officer, who understand that it is impossible and unsustainable to continue with the current tax scheme.

The President of the Republic, Luis Abinader, is aware of the need for a deep tax reform that manages to update the tax scheme. It became evident when he introduced a series of tax burdens in the 2021 Budget project, which he had to back down due to the uproar it caused in public opinion. It was his first setback in the administration of the State.

Abinader was forced to explain. "All the taxes that have been proposed will be agreed with the population, and if some have to be eliminated, they will be eliminated and other sources of income will be sought," said the president on national television in early October.

The Ministry of Finance, in a presentation made to the Economic Commission for Latin America and the Caribbean (Cepal), reported that 92.7% of the collections correspond to tax revenues, that is, income from tax levies that must be paid. natural and legal persons. Meanwhile, the remaining 7.3% corresponds to non-tax income, these being those obtained by the State when receiving a consideration for a service.

The tax burden, that is, the ratio of income via taxes to gross domestic product (GDP), is among the lowest in the region. From 14.7% that was in 2016, it fell to 14.2% in 2018. In 2019 it fell again, reaching 14.05%, according to the Directorate of Internal Taxes (DGII), which estimated that it would reach at least 19% in 2020.

As reported by the DGII, the current income of the central government fell by RD $ 48,716.2 million in the first nine months of 2020, 9.9%, going from RD $ 493,145 million between January and September 2019 to RD $ 444,428.8 million in the same period of this year . The paralysis of the economy, at least during the first three months of the pandemic, caused a drop in collections that forced a reformulation of the Budget on two occasions.

During fiscal year 2019, the DGII collected RD $ 486,914 million, RD $ 56,285.2 million above what was collected in the previous year, equivalent to an interannual growth rate of 13.1%. The effective collection of Income Taxes amounted to RD $ 200,409.1 million, for a growth of 17.5% in relation to the previous year. In turn, the collection for Personal Income Tax was RD $ 59,394.1 million, that is, RD $ 8,030.8 million more than what was received in 2018, for a growth of 15.6%.

Regarding the collection of the Corporate Income Tax, the amount was RD $ 102,493.5 million, with an increase of RD $ 14,390.0 million. In the same order, for the concept of Income Taxes Applied without Distinction of Person, a total of RD $ 36,430.6 million was collected, for a growth rate equivalent to 24.4% compared to 2018.

The Organization for Economic Cooperation and Development (OECD), in a report on the tax burden in Latin America in the period 1990-2010, indicates that in 2010 the tax burden as a percentage of GDP in the Dominican Republic (12.8%) was the third lowest of the countries in the region, after Venezuela (11.4%) and Guatemala (12.3%).

“This reflects lower-than-average tax revenues, as well as a decrease in them since 2007. The Dominican Republic has not managed to break this downward trend in collection, unlike the increases observed in 2010 in many countries of the region ”, points out the organization that groups 37 nations.

Government plans are focused on starting discussions or meetings from the first month of the year. The stage will be the Economic and Social Council (CES), where it will also finalize what is related to the Electricity Pact.

For Macarrulla, who spoke in the McKinney program ", of Color Vision, the entire tax structure should be reviewed because" we have to tax sectors that are not taxed "and that the discussion should start at the beginning of the year and" our goal is to close , at the latest in January, the Electricity Pact, which must be done previously to the prosecutor, because the electricity sector is responsible, until the pandemic, for half of the deficit that the country has ”.

The Administrative Minister of the Presidency, of course, thinks the same as Macarrulla. He said that it is mandatory to carry out the reform, first so that those sectors that do not pay today are formalized, while those that have a lot of weight on themselves in the contributions they make to the economy, can have certain respite that help them to be more competitive. It goes further: "We must promote a comprehensive tax reform similar to the one sponsored by President Joaquín Balaguer in the early 1990s."

Paliza, interviewed in the program D´Agenda, by the journalist Héctor Herrera Cabral, the reform should be made in some cases increase them, in others reduce them, but they will also have to be reinvented, as there are some sectors that have lived with historical exemptions that do not pay them in favor of the country necessarily at the height or level of those exemptions they receive.

The Administrative Minister of the Presidency, José Ignacio Paliza, recalled that the last comprehensive tax reform occurred in the 1990s, when, as a result of the agreements that President Joaquín Balaguer had signed with international organizations, he forced a set of reforms not only in the tax field, but in other areas that stimulated the economy.

He argued that these reforms led to a climate of significant growth when the Dominican Liberation Party (PLD) came to power in 1996.

Paliza also says that he personally agrees with the approval of a Fiscal Responsibility Law as demanded by business groups in the country.

Meanwhile, Lisandro Macarrulla admitted that resources will be needed that will have to be found with financing or by selling some State assets. However, he said the latter would be an extreme option.

This article is the explanation behind why this government wants fiscal reform - but it probably won't happen easily - and why they are so keen to open up the economy at a difficult time with covid19.

This indebtedness is unsustainable for a small developing country and we will not be alone. In fact most countries in the world will have the same problem and there needs to be a global solution of debt relief for most countries. That means everybody pays their fair share.

Tougher times economically ahead imo.

The Dominican Republic already owes 70.5% of its GDP

https://www.diariolibre.com/economia/re … EI26482240

The consolidated public debt of the Dominican Republic reached 58.873.3 million dollars at the end of the first quarter of this year, an amount that is equivalent to 70.5% of everything that the national economy produces in a year.

The rise, anticipated in the face of the tax revenue crisis caused by the COVID-19 pandemic, has been $ 10 billion in the last twelve months, the largest year-on-year jump recorded in public debt in the country.

Data from the Public Credit Directorate of the Ministry of Finance indicate that a year ago, when just the pandemic was declared worldwide and borders were closed to stop the spread of the new coronavirus, the country already owed approximately 48,052.3 million dollars.

The nonfinancial public sector - made up of the central government and other executive agencies - had made commitments for 38,569.5 million dollars with creditors for March of last year, just at the beginning of COVID-19.

Meanwhile, the Central Bank added a public debt of 11,941.8 million dollars at the time.

A year later, the amount of public debt of the non-financial public sector stands at 47,395.9 million dollars, while the commitments of the Central Bank total 13,911.3 million dollars at the end of the first quarter of 2021.

The external debt
The Dominican Republic maintains an external debt of 33,446.2 million dollars at the end of the first quarter of the year, while the debts in the local market add up to 25,427.1 million dollars, according to official data.

For the authorities, indebtedness implies a challenge when it comes to balancing fiscal accounts. Last January, the Minister of Economy, Planning and Development, Miguel Ceara Hatton, said that the Government must allocate almost a third of tax revenues to pay interest on the public debt.

For the first quarter of 2021, according to data from the Public Credit Directorate, 1,015.5 million dollars were paid in interest on the debt of the non-financial public sector, without taking into account those paid by the Central Bank.

They just need to pay attention to eradicate some of the corruption, illegal substances, money laundering and they will have their entire debt paid off.  Will that happen?  Probably not and there is your answer to tax reform.  IMO

Leonel warns fiscal reforms would lead Latin America to "burn in flames"

https://listindiario.com/la-republica/2 … -en-llamas

Latin America will burn in flames if a solution is sought based on the increase in taxes, as warned by former President Leonel Fernández, referring to the fiscal reforms that could be approved in the region, given the economic and health situation it is facing. the world for the pandemic.

Fernández gave Colombia as an example where protests were generated that unleashed deaths and missing persons, which then President Iván Duque withdrew the project. In an interview with the elCaribe media group, he said: “Colombia wanted to carry out its tax reform and what happened, it lit the spark of social protest, that will happen to all of Latin America, which will burn in flames if it tries to adopt as a formula increase the tax on a situation of crisis and calamity ”.

He understands that if tax reform is not politically feasible, it would be creating a situation of instability, ungovernability and it is not known what could happen.

He warned that we must be very careful because great crises generate dictatorships and in that sense he cited that of Adolfo Hitler, Rafael Leonidas Trujillo and Anastacio Somoza.

Interviewed in the elCaribe media group, former President Fernández also referred to the financial crisis in Europe and said that “in Europe, despite so many brilliant minds, they made this mistake, because the bank demands, the bank puts pressure on because it comes first. money before the welfare of the people; Everyone who was in power in 97 European countries came out of power, where the Social Democracy was, the right won; where the right was, the Social Democracy won, only Angela Merkel prevailed ”, he pointed out.

Regarding the tax reform that is being carried out by the current authorities, Fernández said that it should have been done in 2015, “The tax reform should have been done in 2015 and it was not done and then, it was said that it would be in 2019, but like the previous government (Danilo Medina) was in constitutional reform for continuity, he could not address the issue "-

He indicated that "all risk rating agencies are seeing that the Dominican Republic could fall into default and now the economy is like a patient in a state of emergency, it is still fragile," he warned.

The level of debt is now massive and would dwarf any benefits from tackling corruption which has started under this government. Default is probable here as in many other countries in the not too distant future imo.

A third of current tax revenue goes to pay interest payments alone!

IMO there has to be a redistribution of wealth from richer societies to poorer ones and this was my prediction with the pandemic over a year ago as both the economic and social impacts of the pandemic become clearer. It is best to look at this problem not from a western perspective but consider the situation faced by the President here. He is a businessman and he can see the dark clouds ahead and his efforts to rekindle economic activity to the maximun has been his goal all along but covid19 is still flourishing and costing the country dearly.

Abinader advocates possible suspension of surcharges on IMF support loans

https://listindiario.com/economia/2021/ … yo-del-fmi

President Luis Abinader appealed this Wednesday to a coordinated action by the nations of the region, in order to seek a favorable and equitable solution to the current crisis generated by Covid-19.

The president's approach occurred when he headed the "Seventh Ibero-American Meeting of Ministers of Finance and Economy of the Ibero-American Conference", held at the Ministry of Foreign Relations of the Dominican Republic.

The head of state proclaimed that it is time to act, giving a boost to the International Monetary Fund to approve a general allocation of special drawing rights in an amount equivalent to US $ 650 billion to contribute to the provision of liquidity and benefit all member countries in their economic recovery from this crisis.

"But we must go further to claim and obtain new mechanisms that consolidate our position and win this battle that we are raising. The financing needs in the short term will continue to be high, given that tax collections may take some time to return to their trajectory. pre-pandemic, and it is necessary to continue mitigating the health and economic effects of COVID-19, "he said.

Abinader stressed that it is necessary to study and promote a new framework or multilateral standard for the assessment of financial and macroeconomic risks that includes the situation of COVID-19 and response measures to prevent credit rating downgrades from generating a greater effect. risk.

"We must promote discussion, and in the current context the possible suspension, on surcharges on IMF financial support loans to help reduce the financing needs of some middle-income countries that need it most, while maintaining financial strength of the institution "stressed the President.

He indicated that the initiative launched by the Paris Club and the G20 for the establishment of a common framework for the coordinated negotiation of debt relief treatments should be supported. "We must support the discussion of economic policy mechanisms and tools to respond to the crisis and keep their countries on track to meet the 2030 Development Agenda and the Sustainable Development Go

Wow.

Yes. You should follow what is happening in Colombia and see this as a warning for the rest of the Americas south of USA.

There is too much inequality and poverty coupled now with huge national debts.

DR is under stress.

Sorry, Lennox.  I read it differently.

Of course we can disagree but I believe Abinader has read it correctly with debt relief, tax reform and increase the living wage to take people here out of poverty and able to buy the basic essentials to live with dignity. Most Dominicans struggle to survive day to day, even the middle class who are burdened with personal debt and low wages.

DR like most countries in the world cant justify any further borrowing so there has to be wealth transfer one way or another. Whether that be from individuals, rich nations or banks. If it is not done there could be a financial collapse with defaults on borrowing.

I think these are realist perspectives devoid of any politicsl bias.

We are beginning to see greater urgency from government to start tax reform and this is all tied in with the poor economic situation this government inherited and made worse by the pandemic.

There are some good articles to be found in todays Dominican press after proposals were circulated over the weekend.

This is a tricky and sensitive subject at this time but the country in in a hard place economically and some of the measures being touted will affect expats.

Here are some articles to read:

The first one gives you the background to the countries financial problems requiring fiscal reform soon and the limitation it presents for developments of infrastructure and services. It is a long but good read for those interested:

DR at risk of losing credibility if it continues to postpone tax reform

https://eldia.com.do/rd-en-riesgo-de-pe … ma-fiscal/

If a tax reform is not approved, the Dominican Republic would lose its current risk rating, which would lead the country to be considered as highly speculative, which would limit investors' appetite for Dominican sovereign bonds………..

Other articles focus on the tax reforms being touted and I have attached this one from Dario Libre:

Government has discussed raising and adding taxes in new tax reform

•     Label, salaries, courier and drinks among those analyzed
•     Deduction of educational expenses and exemption of vehicles to remove

https://www.diariolibre.com/economia/go … JM29256492

Among the catalog of proposals that the Government has analyzed for a new tax reform are varying the amount paid for the vehicle label, establishing a tax for sugary drinks, increasing the income tax (ISR) from 25 to 35% for the higher income salary scale, eliminate the deduction for educational expenses from ISR and take away from legislators the privilege of importing tax-exempt vehicles.

Also, it has been contemplated to establish a single rate of 16% for the tax on the transfer of industrialized goods and services (itbis), whose name has been discussed changing to value added tax (VAT). It has been proposed to bring the assets currently encumbered with 18% to 17% in the first year, to 16.5% in the second year and 16% thereafter.

Two official sources consulted by Diario Libre confirmed the legitimacy of a 94-page document that circulated over the weekend with these and other proposals for the announced tax reform and its justification in the current economic and regional situation.

Although both sources agreed to explain that it is not the official or final document, they validated that it contains proposals that have been discussed internally in the Government to define the future tax reform, for which President Luis Abinader is seeking consensus.

According to sources, since last year the Government of Abinader - which began on August 16, 2020 - has been working on the issue and there are more than 100 different versions, as each measure is weighed.

They added that the document was prepared with all possible figures that could be weighed in an internal discussion, and that it has been "extensively modified."
Among the proposals discussed is to temporarily increase the income tax rate for legal entities to 30% in the three years following the approval of the reform, returning to 27% at the end of that term. Also, raise the sales tax to the local market for free zone companies to 5%.

As for individuals, it has been proposed to bring the rate for the IRS salary scale from 25 to 35% to higher-income workers, that is, with more than RD $ 867,123.01 per year. In addition, that ISR pay workers' compensation, notice and severance pay also above that salary amount.

Drinks and cigarettes

The Government has also discussed increasing the specific selective tax on alcoholic beverages to RD $ 1,000 for each liter of absolute alcohol, indexable quarterly. With this, he calculates that it would have a collection impact of RD $ 8,202 million in 2022.
Likewise, it has contemplated that all beers with an alcohol content of less than 4.9% ( light type ) are subject to the amount of specific tax paid by regular ones. This proposal has a potential collection of RD $ 1,690.6 million.

Other proposals discussed are a tax of RD $ 8.9 per liter of drinks with added sugar and a selective tax of 130% on imports of electronic cigarettes and the supplies to use them.
Patrimonial and others

Another approach analyzed is to restructure the Simplified Tax Regime so that taxpayers with income above RD $ 1,050,500 per year are taxed according to the criteria of natural persons.

The Dominican Republic has one of the lowest fiscal pressures in the region, that is, it has low taxation. In 2018, the region's average was 19% of income as a percentage of gross domestic product (GDP), while the Dominican Republic was 14.2%.

The foregoing -indicates the Government in the document validated by the sources consulted by Diario Libre- , conditions the country to have one of the lowest public fees, limiting its ability to satisfy the basic needs of the population and to meet the high debt public.

The debt service of the non-financial public sector exceeds RD $ 215,409 million in the reformulated national budget of this 2021, higher than the combined budget of a series of public institutions.

"With a fiscal adjustment, the financial position of the Dominican Republic would be strengthened, the debt would fall to prudent levels that would allow the Government to have more space to invest in development," he argues.

On a temporary basis, it has been discussed to tax with 1% the value of the Assets of Individuals greater than RD $ 60 million, excluding real estate, during the first two years after the approval of a tax reform, to allocate said resources to a fund to build hospitals .

Proposed changes in taxes always get the peublo to sit up, listen and ask questions, so to follow up, here is a question and answer article just now from Diario Libre:

10 basic questions about a tax reform in the Dominican Republic

https://www.diariolibre.com/economia/10 … AM29256565

Faced with the government's readiness to find a consensus for a tax reform, Diario Libre asks Germania Montás, an economist and former deputy director of the General Directorate of Internal Taxes, 10 basic questions.

1. When you hear the term tax reform, you can think that taxes will be raised, is that right?

In general, reforms are carried out to increase state revenues, although there are exceptions. Reforms can be made by addressing the issue in various ways, and raising tax rates is one of them, but in my opinion, the rates of our main taxes are at levels that should not be increased.

Also, the issue can be addressed by including more goods and services to be taxed with consumption taxes (general or selective), eliminating incentives or exemptions, expanding the income or profits that are taxed with income tax and including new goods to be taxed with a wealth tax, in addition to real estate. That is, rates can be increased or the base expanded.

2. How many tax reforms have been made in the last decade and what have mainly changed?

In 2011, Law 139-11 was approved, which basically establishes taxes on games of chance, temporarily increases the income tax rate from 25 to 29%, and establishes the tax on net productive financial assets that it applied only to the financial sector, which was also a temporary tax.

In 2012 a reform was carried out through Law 253-12. In it, the Itbis rate is increased from 16 to 18%, some foods for mass consumption such as coffee, cocoa and oil are taxed. Also, the tax on the interests received by individuals is established, the deductions allowed for interest paid are limited, the tax on dividends or profits distributed by the companies to their partners is established and the income tax rate is increased by 29% decreasing to 27%, among other provisions.

In this law, in its recitals, it is proposed to achieve what the National Development Strategy (Law 1-12) establishes, which to date has not been achieved. Then each year changes were made to tax laws within the budget law, effective for one year.

3. What should be included in a new tax reform?

If the provisions of Law 1–12 are followed, what must be included is established in the same law. In short, increase tax pressure, rationalize tax incentives and reduce evasion. For that, it established the need to carry out a fiscal reform, but through a fiscal pact. If it is to solve difficulties, such as assuring creditors that they have the resources to maintain compliance with debt payment obligations and maintain public spending at the necessary levels, there is no recipe.

4. Should eliminating tax exemptions to sectors and privileges to civil servants be in an upcoming tax reform?

Reviewing the incentive laws should be a constant task, since it should be periodically validated if they have fulfilled their mission. Now, at this juncture, we must think carefully about which sectors the incentives can be eliminated, because if the objective is to collect, those in crisis would not contribute much.

As for the privileges for officials, if you refer to the issue of congressional vehicles, I understand that, apart from a reform, they must be reviewed.

5. When it is indicated that the Dominican Republic has the lowest tax pressures in the region, does this mean that it is imperative to raise taxes?

It is one of the lowest in the region. That is a reality. This indicator measures what percentage of GDP the tax collections that the State receives represent. The average for Latin America and the Caribbean is around 23%. For example, Costa Rica and Nicaragua have 23%, Colombia has 20%.

Increasing the tax pressure was approved since 2012 with the National Development Strategy Law. It was established in said Law that in 2015 we would have 16% and we would end up with 12.9%, in 2019, we would reach 19% and the tax pressure ended at 12.4%. However, it must be considered that this crisis caused by the pandemic will generate greater demand for resources and worse conditions for economic agents to operate with higher taxes. Which makes the decision of who, how and how much more to tax more complex.

6. Taxes only go up but never go down again?

It is difficult to do without resources that we already have, even more so if the tax pressure, as we have said, is low. But I give you two cases in which they were reduced: in 2007, through Law 172-07, which reduces the Income Tax rate (from 30% to 25%); Also in 2007, Law 173-07 was issued, which eliminates and consolidates taxes.

7. Would it be better to optimize the use of state resources so as not to have to carry out fiscal reforms?

There are always opportunities to optimize the use of State resources, but it must be considered that the level of public spending over the country's GDP is below that of many similar countries.

The average of total spending over the region's GDP was close to 28% in 2019, while the Dominican Republic was at 16%. For example, Nicaragua 17%, Colombia and Costa Rica 31%, El Salvador 25%, Peru 21%, and so on.

8. If a tax reform is not carried out now to apply it to the 2022 state budget, would it affect the country's economy at all?

Having higher income would allow the Government to have more resources available to implement policies that benefit the population or reduce the deficit, which would lead to a lesser need for financing. However, if not done correctly, a tax reform could have worse consequences on the economy than not doing it.

9. In other countries, fiscal reforms have been proposed in this pandemic and that has generated social unrest. Is this a good time for a reform in the Dominican Republic?

In my opinion, some adjustments can be made to tax laws that have been pending in tax laws, such as defining in the Law elements to tax with existing taxes some activities that have arisen in the last 15 years or limit some deductions and things So. However, I do not think this is the best time to carry out a reform with a vision of the future, or with a structural impact, since the future is not so clear at this time as to make long-term decisions.

10. People may think that public and private corruption will “steal” those taxes that come from a tax reform. How can the Government convince the population that they should pay better taxes?

I do not think that I am the one who should answer this, but it is clear that the Government must structure an information campaign that gives legitimacy to what it is going to propose and maintain quality spending execution.

Interesting and  we knew it was coming.  They should also get rid of as much of the underground economy as possible!

It appears there is a gradual acceptance this is going to happen because economically it must.

They are calling for cutting costs first and to be fair the Abinader government has been doing that across the board as well as starting to arrest the corrupt and drug linked. He has even set up a team of lawyers to seek out those who have ill gotten hidden wealth.

The PLD are arguing it is not the right time and I dont think anyone disagrees with that but it is at the point of being absolutely essential because or the country gets credit down rated and borrowing costs escalate and to fund developments badly needed will not happen.

The emphasis perhaps should focus on companies and the better off will be the argument of many. Property tax and vehicle tax rises are mentioned as well as higher ITBIS, telephone/data costs and higher income tax at the top brackets. The reality is that Dominican wages remain too low for most to live adequately so people are rightly anxious to avoid the extra costs coming their way.

There is also the informal economy but dont see plans to tackle that yet.

The expectation is that it could be introduced  to the legislators shortly for review and agreement and this is all tied into next years budget.  The document mentioned before may have been put out there to test the water and focus discussion. Remember this was tried a year ago and got deferred.

It is rough but the alternative could be much worse for the pueblo.

They need to continue fighting corruption.  They need to tighten the loopholes.  Stay away from the growing middle class and small and medium business. They cannot afford more taxes.  And the poor cannot afford anything!

Correct planner there is plenty of push back about more taxes on the middle class as below.

Finding where to make fiscal reform, which is becoming to be accepeted as almost inevitable, is going to be the challenge in the next few weeks.

I think they should ask legislators to start by giving up some of their salary, perks and the 'barrels' as a sign of good intent and solidarity with the people.

Discussed Proposals for Tax Reform Fall Hard on Middle Class and Opposition

https://www.diariolibre.com/economia/pr … JO29273318

There are those who consider it a trial and error among the population that a true document has circulated with proposals analyzed by the Government for the imminent tax reform. Whether it is true or not, the proposals have generated criticism and rejection, especially among the middle class, who are angry that there has been a debate to increase the income tax (ISR) to 35% on a salary higher than RD $ 72,260 per month .

"The project proposes that those who earn more than 867 thousand pesos per year, that is, 72,000 per month, must pay 35% taxes, which is another absurdity if the same project states that companies will pay only 30%," he raises by written by tax law specialist Edgar Barnichta Geara. "It is a disparity that cannot exist, because we will all form partnerships to avoid a 5% difference in taxes."

The National Council of Private Enterprise (Conep) and other sectors consulted by Diario Libre prefer to wait for the official proposal that the Government will present to give their opinion.

Perremeista José (Bertico) Santana, president of the Finance Commission of the Chamber of Deputies, argues that "what is on the street" is pure speculation. "Unfortunately, the tax reform must be done, but no one has wanted to assume the political cost (that it entails)," says the legislator. "But the PRM and President Luis Abinader have decided to carry out the reform and they are going to carry out the reform, but the reform is going to be carried out that everyone agrees on."

The Government has stated that an adjustment is necessary before the markets impose it and for this it is based on recommendations from risk rating agencies.

In the document that circulates on the internet with the proposals discussed, the Government has indicated that in November 2020 the rating agency S&P Global indicated that it could “lower the ratings if the Government cannot approve reforms” to curb the fiscal deficit.

The Government also indicates that the rating agency Moody's indicated in October 2020 that the "lack of response from the authorities to address the underlying trend of a persistent increase in public debt would lead to a downgrade of the rating."

The president of the National Association of Companies and Industries of Herrera (Aneih), Noel Ureña, says that this sector hopes that the tax reform will not only be to increase rates, but to make income and expenses more transparent.

"Review and lower some rates, remove tax on inventories, lower the Itbis to 12 percent and expand the base, which does not touch or health or medicines and the fields of the field," suggests Ureña to take into account for the tax reform.

Among the catalog of proposals that the Government has analyzed for the announced reform is to establish a single rate of 16% for the tax on the transfer of industrialized goods and services (Itbis). This would imply bringing the assets currently taxed with 18% to 17% in the first year, to 16.5% in the second year and 16% thereafter.

Also, eliminate the advance for individuals and MSMEs, set a payment of 1% on the market value for the label of vehicles with a value greater than US $ 10,000, establish a tax for sugary drinks and eliminate the deduction of the expense education of the ISR.

The PLD deputy Luis Henríquez Beato affirmed that, if the fiscal “revolution” proposal that has been elucidated becomes official, “the middle class will disappear”. "In the Dominican Republic from the application of this fiscal revolution, there will be two classes: the poor class and a rich class," he says.

"I do not think it is true that the reform that is circulating around is what they (the Executive Power) are going to send," understands the senator of the People's Force, Dionis Sánchez. "I think it is a test balloon to see how it falls in the population."

The government has also discussed repealing a series of exemptions for the tourism, manufacturing, education and other sectors. “Amortization of hotel investments is eliminated for income tax purposes, but they still enjoy many other exemptions,” observes Barnichta Geara. "The hotels have nearly 40 years benefiting from exemptions while others pay taxes," said the expert

Its going to be interesting to see what they do.  Various groups have big lobbying  fractions, the people really have none. 

And its imperative. A decrease in our rating is a big issue that must be avoided.

planner wrote:

Dont be asking for more taxes,  ask everyone to pay their share as appropriate!   The  underground economy is huge here. They have been  poking away at it but the loss of  tax revenue is huge. If everyone paid what is  reasonable based on income then  much of the shortfalls would disappear!

We are suffering a lot, but that is only one part of the problem, goverment also must work very hard to stop the corruption, we are missing a lot public money because of that cancer we have installed as a norm from very long ago.

From the reaction reported in the media to this document that has been circulating, I doubt increases in personal taxation to the middle class will be an option.

Where they find money to reduce the fiscal gap between expenditure and income is going to involve some tough decisions which will be unpopular to some constituencies.

Politicians will be in the spotlight which ever way they decide.

You are right that this current purge on corruption must continue and intensify. The President this past week introduced his team of lawyers working with government to trace hidden properties and monies spirited away from public funds.

We have all heard the stories of politicians and people in high places having big proprties countrywide. Did they declare them and if not why?

I am sure Riva that you and many other Dominicans want answers and a break from the past?

Absolutely  Riva!  I agree

We will know shortly what are the final proposals:

Government will present tax reform proposal in the coming days

https://www.expat.com/forum/viewtopic.p … 94#5262052

The Dominican Government is making progress on the fiscal reform proposal and it will be presented in the next few days by the Ministry of Finance, informed Luis Valdez, general director of Internal Taxes (DGII). 

“It is very advanced. The Minister of Finance will be handling this and in the next few days it will be presented, ”said the official.

He pointed out that the country has been dragging a deficit budget for several years, which makes it difficult to move forward if a fiscal reform is not carried out.

Regarding the document that has been released with proposals discussed within the Government for a tax reform, he pointed out that "it is a draft of a proposal that was made at some point, but it is not definitive."

He reiterated that the Minister of Finance will inform when the official proposal will be presented.

The official spoke after attending the swearing-in ceremony of the new board of the National Association of Young Entrepreneurs (ANJE).

You won't be seeing much recovery of bribes paid in the Odebrecht bribery case after yesterdays trial verdicts. They convicted Rondon of facilitating the bribes but due to lack of proper evidence obtained by the previous Prosecutor General, who is in preventative custody for acts of corruption himself, they could not convict those benefitting from the bribes. Typical of past governments failings dealing with corruption. Hope this one does better with their new cases and expect Odebrecht 2 and 3 to start soon on contract overpricing and Punta Catalina.

Rightly so the average Dominican is pissed off that white collar crime has often failed in prosecution here and is wanting change. And with proposed fiscal reform this is going to upset people more if the burden falls on them.

Though not PC the government should tax or increase all the taxes on vices legal and non.including prostitution.

Tass56 wrote:

Though not PC the government should tax or increase all the taxes on vices legal and non.including prostitution.

Good idea in theory, but how do you tax illegal activities?

And if they raise taxes on alcohol, it will increase the consumption of cleren and lead to more deaths.

Like Peter Tosh said legalize it, don't criticize it.You can't and won't stop the drugs so legalize and tax them and I believe Leonel Fernández when elected in1996,raised taxes on cigs.and beer and possible hasn't been raised since, could be wrong.

Also on the clarren issue it doesn't help that some people think that it fights covid