Case. Failed attempt to build a new airport
Although the first reading approval in the Senate of the elimination of all tax incentives is absurd, in the case of tourism, the Tourism Development Council (Confotur) must make a “more rational management of the incentive policy,” said the economic analyst Henri Hebrard.
The case of the “unsuccessful attempt” to build a new international airport in the tourist destination Punta Cana, he said, already disallowed by the Superior Administrative Court (TSA), and the debates on that project by supporters and adversaries “show that it will be necessary in the future, a much more rational management of the incentive policy for the tourism sector ”.
It is striking, he argued to support his opinion, that Confotur, despite the unfavorable recommendation of the Ministry of Finance in July 2020, decided “to grant the project of the international airport in Bávaro tax incentives for a period of 15 years that would represent an enormous fiscal sacrifice of the State around RD $ 4,500 million ”.
Hebrard points out, when analyzing the fiscal expenditure in this project, that the Treasury concluded that without the tax incentives, the project would not be financially profitable, because the initial investment is not recovered; and also that the high tax sacrifice would not be compensated because “the indirect benefits of the project to society would amount to RD $ 222.1 million, which only covers 5.0% of the incentives.”
He assures that the approved incentives are not justified by the allegation that it is necessary to eliminate the supposed monopoly that the existing airport has, because the information from the Central Bank shows that this argument is unsustainable.
The analyst explains that official statistics show that the three airports that exist on the east coast absorb 80% of the passengers that arrive in the country and are operated by economic groups that compete with each other: Vinci Airport, the one in Las Américas; Central Romana, that of La Romana and Grupo Puntacana that of Punta Cana.
He considers that it is important to note is that in the Eastern region, in the years 2018-2021 the Punta Cana airport has lost participation compared to Las Américas and La Romana, falling from 67.4% (2018) to 62.4% (2019), and after covid-19 it has fallen to 49.0% (2021), which shows that there is no monopoly in the region; “So this cannot be argued either,” to approve the incentives.
For situations like this, says Hebrard, “it is wise only to grant tax incentives, if they are contemplated in the law, and they are well designed because they are very well focused; conditional (amount of investments, creation of jobs, generation of foreign exchange); limited in time; and most importantly, very well managed ”.
When they do not meet these four characteristics, he points out, “and especially when the management of incentives is as deficient as in the case of the failed airport, there is a risk of causing irrational uses of fiscal facilities (especially taking into account the current financial limitations of the State), or what is worse, that it is decided to solve these problems by eliminating incentives to the tourism sector, as the Senate wants, and this would be absurd ”.