Tax spending rises 9.9% in the 2023 general budget

Tax spending rises 9.9% in the 2023 general budget

By 2023, the Dominican treasury will stop receiving 310,120.7 million pesos for preferential tax treatment for sectors, activities and taxpayers, according to estimates made in the 2023 national budget project, an amount greater than the reestimated for this 2022.

The Ministry of Finance estimates that, in general, the projections of these exemptions and benefits (tax expenditure) for 2023 suggest an increase of 9.9% with respect to the reestimated for 2022, in response to greater consumption of services and goods, produced both in the local and foreign markets; more commercial activity in the hydrocarbon sector; and the gradual normalization of employment levels and production chain.

When considering the tax expenditure By benefited sector, 75.3% of the estimate for 2023 is concentrated in five sectors or economic activities: generalized Itbis exemptions to individuals in the transfer of consumer goods and services (41.7%), free zones (12.1%), health (9.2%), education (5.4%), electricity generation (3.8%) and tourism (3.1%).

The tax expenditure projected for 2023 is equivalent to 4.5% of the gross domestic product (GDP) estimated in the 2022-2026 Macroeconomic Outlook, which represents a relative reduction of 0.10 and 0.05 percentage points with respect to the estimate in the 2022 General State Budget and the reestimated for the same year, respectively.

The Treasury details that, at the end of 2022, the collection capacity of the Dominican tax system depended 88.1% on five taxes: on income (34.0%); Itbis (33.5%); on hydrocarbons (8.7%); the tariff (6.4%); and selective to alcoholic beverages and tobacco (5.6%).

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