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Thread: 95 percent of new companies go bankrupt within three years

  1. #1
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    Default 95 percent of new companies go bankrupt within three years

    Here's something to think about as you plan your next business venture in the DR. Although, there is lots to question about the reporting.


    Santo Domingo.- The elimination of the severance pay, a simpler tax reporting process and the exclusion of the tax payment in advance, are some of the proposals which the Dominican Merchants Federation (FDC) seeks this year as part of the country’s labor and fiscal reforms.

    FDC president, Iván García, said the points pose a problem for MSMEs, which in many cases have to borrow to meet those commitments.

    During a luncheon Tues. at the Santo Domingo Country Club, Garcia, accompanied by other FDC directors, said 95% of the companies created in the Dominican Republic go bankrupt within three years, due to tax and social security burdens.

    “We understand that this country cannot continue charging taxes to a new small business just as it is charged to a large company that has been established for several years,” the business leader said.

    https://dominicantoday.com/dr/econom...y-advance-tax/

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    More like lack of planning ahead. The laws are there, people just don't budget and program themselves to have enough $$ to cover everything during the first few years until a business actually starts coming out in the black.

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    lack of planning certainly plays the part and i am sure many starting businesses are not legal anyways and therefore do not bear social costs but it is also true that just one bad worker can bring a small business down. and so can a surprise inspection from DGII. existing labour law does favour the employer and no wonder so many of them try to screw the system before the system screws them...

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    So many employees pull the "severance pay scam".

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    Quote Originally Posted by dv8 View Post
    lack of planning certainly plays the part and i am sure many starting businesses are not legal anyways and therefore do not bear social costs but it is also true that just one bad worker can bring a small business down. and so can a surprise inspection from DGII. existing labour law does favour the employer and no wonder so many of them try to screw the system before the system screws them...
    you mean it favors the employee right? The severance pay law is bad on so many levels....for both employees and employers

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    Quote Originally Posted by Conchman View Post
    you mean it favors the employee right? The severance pay law is bad on so many levels....for both employees and employers
    yes, sorry, it was supposed to say "does not favour the employer".

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    Failing to plan and being under capitalized are the biggest reasons by far in my experience. I have dealt with many small businesses here (call centers and a few others) that do not have a business plan and no idea how do make a business plan. I have a template i give them showing them how to forecast but most can not be bothered.
    Being undercapitalized is not unique to the D.R.

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    I agree that the severance scams and taxes certainly play a part but from my experience the main reason for business failures is a complete lack of planning. How many times have we seen a successful business go down because 4 or 5 other lazy clowns open the exact same business within spitting distance of the first one and then they all shut down.
    After 10 years here I can't count how many times I have seen this.
    You would think this type of stupidity would eventually cure itself.

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    Quote Originally Posted by Garyexpat View Post
    Failing to plan and being under capitalized are the biggest reasons by far in my experience. I have dealt with many small businesses here (call centers and a few others) that do not have a business plan and no idea how do make a business plan. I have a template i give them showing them how to forecast but most can not be bothered.
    Being undercapitalized is not unique to the D.R.
    My brother spent two years in Cuba doing micro-loans and part of his job was to teach Cubans how to form a business plan, a budget....etc. No business plan, no loan. The challenge here in the Dominican Republic is having to set aside , depending on the size of your business 500,000 to a million pesos for 13th salary, plus paying your income tax ahead....etc. Then trying to collect from delinquent clients is no easy feat either.

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    As someone who runs a small business here, I think the biggest problem is that all the TSS and DGII rules are so complicated and there is nobody who can tell you how to do things. Nobody gives you training, no manuals. I'm from the UK and when you set up a company here, the tax authorities invite you to training sessions, also available online, and they really push you to go so that you understand how to calculate the taxes, what you can claim and not claim. And then you have a named person to call if you have questions. In Dom Rep it's 200 times more complicated and zero help. The approach is designed to help you make mistakes and when you do make a mistake you are treated like a criminal.

    One example is Christmas pay. It took me 5 years before I realised that you can declare the amount you pay in Christmas pay to the TSS, and you get a credit against your profit tax for this. It's buried in a help screen, you can only do this in December, not afterwards, and when you do enter the amounts of Christmas pay, you have to take a screenshot as there is no way of checking what you entered in the TSS system afterwards. Just to do basic accounts and pay tax I've had to pay a programmer to write specialist software for us.

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