The tax reform prepared by the Executive Branch seeks to increase collections between 1.5 and 1.7% of the gross domestic product (GDP), that is, around 110,000 million pesos annually, according to unofficial information obtained by Free Newspaper.
The government believes that a further increase in tax revenues could disrupt the economy and affect future GDP growth, as well as causing social tensions.
Public finance authorities are convinced that without an increase in tax revenues, it will be impossible to increase capital spending on infrastructure and public services which requires sustained growth; debt service would weigh increasingly negatively and more financing would be needed for the fiscal deficit. He is convinced that the new Fiscal Responsibility Law severely limits the State’s financial room for manoeuvre by restricting spending and borrowing.
As part of the fiscal reform, of which the tax reform is a component, the government intends to modernize and strengthen the tax administration, broaden the tax base and reduce the levels of informality. The agenda includes the simplification of the tax system, the increase in efficiency and the enhancement of equity. The rationalization of tax incentives and exemptions, which currently amount to 4.6% of GDP, is cited as instruments for these goals.
The tax reform proposed by this administration revolves around a basic principle: two companies/taxpayers with the same net profit must contribute equally, that is, pay the same taxes. According to Diario Libre sources, this is a non-negotiable and indispensable point for equal tax treatment.
The tax base
The erosion of the tax base is one of the major concerns of the current authorities, faced with a tax evasion which is around 45% for the tax on transfers of industrial goods (Itbis), and around 56% of the burden on income.
The tax reform The proposal of this administration revolves around a basic principle: two companies/taxpayers with the same net profit must contribute equally, that is, pay the same taxes. According to sources from the Free Newspaperthis is a non-negotiable and essential point for equal tax treatment.
It will cover everyone
According to reports, the tax administration is betting on a reform that will affect both the State and the productive sector and households. Therefore, it will cover both expenditure and taxes and their collection.
178,966
These are the millions of pesos that would be invested in water and sanitation.
176,358
These are the millions of pesos that would be allocated to transportation solutions.
52,170
This is the amount of millions of pesos that would be distributed for citizen security.
The distribution
Behind the reform is official concern about public debt, which stands at 56.6% of GDP. Of all tax revenues, 21.8% is already used to service this debt.
The increase in revenue will finance citizen security (52.17 billion pesos), transportation (176.358 billion pesos), health (10.87 billion pesos) and water and sanitation (178.966 billion pesos) over the next four years.
It is estimated that 22,233 million pesos will be allocated to the recapitalization of the Central Bank of the Dominican Republic and another 18,000 million pesos to the electrical sector.
In response to low tax collection and high tax evasion and avoidance, the tax authorities are preparing severe punitive measures, as well as a thorough review of VAT incentives and exemptions.
