The much debated tax reform bill passed its first vote in the Chamber of Deputies last night with a majority vote of 121 yeas out of the 131 deputies present, as reported in Listin Diario. Today it has to pass the final vote in the Chamber. The bill excludes taxing sugar, molasses, oil, coffee, cocoa, chocolate, fertilizers and their components, insecticides, pesticides, herbicides, raw materials and capital goods for the agribusiness sector, seeds, and animal feed. Also excluded are pencils, chalkboards, chalk and gymnasiums, "among many other products of mass public use". The bill was modified following a request by a group of PRSC and PRD deputies who sought to exclude a 2% anticipated tax on imports as suggested by the US Trade Department, which has said that tax would mean unequal treatment for imported products and could hinder the DR's chances of entering DR-CAFTA in January 2006.
Diario Libre indicates that the bill has been in Congress for two months and ten days. The modified version that was voted on last night represents collections worth RD$25 billion. It includes a 1.5% anticipated income tax on net sales and an increase in fuel taxes. Also, the first registration of new vehicles was increased to 17% and the selective consumer tax on several household appliances was increased to 32%.
El Caribe reports that the Chamber of Deputies session last night lasted for four hours and that the modified version of the bill voted on cuts back the original amount proposed by the government by RD$7.3 billion.
Among the substantial changes introduced in the tax reform bill is the increase of income tax to 30% for earners of more than RD$900,000.01 annually and the extension of the application of this tariff until 2011. Listin Diario reports that it also includes taxes that were not part of the consensus established by the National Dialog with the mediation of Pontificia Universidad Catolica Madre y Maestra (PUCMM), such are a 10% tax on the retail of soft drinks. The project also establishes a RD$17.09 tax per gallon of regular diesel and RD$21.54 per gallon of premium diesel for general use and a 17% tax on the first registration of new vehicles. The bill contemplates a new 20% tariff on intravenous and oral re-hydration solutions. The income tax scale for individuals will be 0% for income up to RD$257,280 annually (RD$21.440 per month); sums exceeding this amount will pay 15% up to RD$385,920 annually, and from RD$385,920.01 to RD$536,000 annually will pay 20%. Income exceeding RD$536,000.01 up to RD$900,000 will pay 25% and from RD$900,000.01 onwards will pay 30%.
Diario Libre reports that the total income the government will collect from the modified bill is RD$25.278 billion.
Both the government and the PLD have reacted against US ambassador Hans Hertell's speech at the American Chamber of Commerce, where he called for stronger border controls to prevent drug trafficking, demanded transparency in the Metro project and complained, among other things, about corruption and the impunity that protects it, as reported in Listin Diario. Hertell had said that these difficulties put the country at risk of not being included in DR-CAFTA next January. In reaction, Armed Forces Minister, Admiral Sigfrido Pared Perez, the President of the National Drug Control Department (DNCD), Rear Admiral Ivan Pena Castillo, the General Director of the Office for the Reordering of Transit (OPRET), Diandino Pena, and the Secretary General of PLD, Reinaldo Pared Perez, refuted the diplomat's comments and defended the government's actions. Admiral Pared Perez stated that no country in the world has been able to prevent drug traffickers from bringing drugs into their territory, including the US. He promised that the Armed Forces would continue their offensive against organized crime and considered that there has been progress against trafficking in this country on a level that few countries can claim to have achieved. Rear Admiral Pena Castillo pointed out that the DNCD has been drastic in the fight against drug trafficking in the DR. Diandino Pena informed that the tender process for components of the Metro began yesterday through the call for the participation of companies from Spain, Canada, Brazil, France, and Germany, which will compete for the project. Pena expects to dissipate the ambassador's concerns about a greater coordination of information regarding the project and assured that the tendering system constitutes 55 to 60% of the project. The international firms participating in the tender are Alstom Transport, from France; Bombardier Transportation, from Canada; Caf-Construcciones y Auxiliar de Ferrocarriles from Spain; Ansaldo Breda, from Brazil; and Siemens-Railway Transport Division, from Germany.
Bear Stearns and Standard & Poor's have issued their monthly reviews of the Dominican economic situation. Standard & Poor's Rating Service released a report yesterday that looks at the economic challenges facing the signatories of the DR-CAFTA free trade agreement. The report looks at the complementary agenda at the core of DR-CAFTA and looks at some of the important issues and challenges ahead for these countries. The report is called "Credit FAQ: DR-CAFTA's Success Depends On Meeting A Challenging Agenda." In summary, the report says that if these nations cannot properly address the important issues, it will be denied much of the promised economic improvement. Analyst Roberto Sifon Arevalo said that addressing these issues will be costly and difficult because the region, including the Dominican Republic, has high social needs and one of the lowest levels of tax revenue among all of the sovereign nations rated by S&P. Sifon Arevalo said that there is a "fiscal rigidity, that added to the expected loss of income due to the elimination of trade tariffs," which creates a restrictive scenario for just what can be done within the complementary agenda. The key point of the analyst's report is the requirement for a "unique partnership between the public and private sectors to help bolster growth, strengthen public finances and improve regional creditworthiness." Sifon Arevalo pointed out that the free trade agreement would mean little if the region's producers can't "move their products in a quick, easy and cost-efficient manner." He also signaled the need to provide an educated work force that is well prepared to join the more technologically intensive markets in agriculture as well as in manufacturing. There is a stark warning that says that the region may not survive, let alone compete with China and India, if it does not face these realities. On the more positive side, the analyst says that the region's financial sector is "quite liquid" and capable of facing a large demand for credit, but it is extremely important for the region's controls on banking, supervision and credits be "deepened and integrated to provide transparency, better efficiency and reduce risk and the cost of doing business." He warns that the DR-CAFTA agreement is not a magic solution for the area's problems, and that important adjustments are needed in order to obtain suitable results.
The most recent Bear Stearns Emerging Markets Sovereign Journal Weekly notes that the Dominican Republic has announced that it reached an agreement with a group of international commercial banks known as the London Club. The agreement will allow the deferral of US$180 million worth of debt payments due in 2005-2006 for up to five years. As part of the agreement the Dominican Republic paid out US$35 million in overdue payments that were owed to commercial banks that had accumulated as of December 2004. The Fernandez administration now has to send the agreement to Congress, which it has not yet done, according to Bear Stearns. However, the delay was apparently caused by the overlong time that the bank's lawyers took in reviewing the contracts and the supporting documents. Sources say that earlier this week the papers were sent to the proper authorities and it is now up to Congress to approve the deal in a timely fashion. Bear Stearns says that any delay in the agreement's approval will produce negative waves in the financial community, generating undue "financial uncertainty", and this could promote negative feeling for both international and national investors and bring the improving ratings of the Dominican Republic to a halt. Bear Stearns also looked at the tax reform proposal that was passed in the Chamber of Deputies yesterday. The report from Bear Stearns says that passage of the legislation is a key part of the IMF agreement and the market is following the progress of the legislative process quite closely.
Articles 63, 80 and 143 of the Tax Code (Law 11-92) have been declared unconstitutional by the Supreme Court of Justice (SCJ). Listin Diario reports that the decision is contained in several sentences resulting from unconstitutionality recourses several entities and individuals have presented against the law. The articles revoked established that people who felt that they were unfairly affected by a tax would first have to pay the collected amount before being able to present any recourse against it.
During the first ten months of this year, the Tax Department (DGII) collected more than RD$62.624 billion, 11.08% (RD$6.846 billion) more than estimated (RD$61.778 billion). Listin Diario reports that the highest growth took place in income tax, with RD$4.271 billion. Last month, the DGII collected RD$6.222 billion, equivalent to a 34.28% increase compared to the same month last year.
The Ministry of Public Health has delivered 100 incubators, 350 cradles, 48 monitors, 23 laryngoscopes and 329 helmets as part of an effort to reduce child mortality to 17 per thousand by 2015. Listin Diario reports that the hospitals receiving the equipment were Nuestra Senora de la Altagracia, Robert Reid Cabral, San Lorenzo in Los Mina, and Luis Eduardo Aybar in Santo Domingo, and Jose Cabral y Baez, Arturo Grullon and Juan XXIII in Santiago. Also, Dr. Pascasio Toribio in Salcedo, Dr. Leopoldo Martinez in Hato Mayor, Antonio Musa in San Pedro de Macoris, and Engombe and Villa Mella in Santo Domingo. Public Health Minister Bautista Rojas Gomez reported that 62% of child deaths occur during the first 28 days after birth.
PRD President Ramon Alburquerque is warning that minister Diandino Pena is using billions of pesos "mysteriously and without control" in the construction of the Metro, and is asking President Leonel Fernandez to halt work on the project, as reported in Diario Libre. He also mentioned the possibility of having Congress question Pena for allegedly using fiscal resources without control. He stated that Pena does not have an investment plan nor an executive design for the construction of the Metro, and yet work has already begun on the project.
Telecommunications Institute (INDOTEL) Director Jose Rafael Vargas has said there is an industry of libel and professionals who extort others through telephone espionage. He stated that phone tapping is penalized with imprisonment and fines, according to El Caribe. "No company, institution, or person in this country is authorized, no matter how powerful they may be, to intercept or violate the privacy of a person or institution" warned Vargas. Phone tapping with the intention of spying on individuals suspected of illegal activities is authorized by a judge for a maximum term of 30 days, according to Supreme Court of Justice resolution 2043-2003.
The four telecommunications providers in the DR - Verizon, Tricom, Orange and Centennial - are authorized to start assigning the new 829 area code to both cable and wireless lines, in addition to the 809 code currently in use, as reported in Diario Libre. This information comes from the Telecommunications Institute (INDOTEL) Director Jose Rafael Vargas, who announced the launch of an advertising campaign to increase awareness of the new code.
Spanish former Prime Minister Jose Maria Aznar will speak about "Challenges and Opportunities for Latin America" at 7:00 pm tonight at the Global Foundation for Democracy and Development (FUNGLODE), as reported in Diario Libre. The organizers of the event have indicated it is open to the public.
Twenty-one Dominican artists are painting murals along Avenida de la Salud and Cayetano Germosen Avenue in Mirador del Sur Park as a result of a sudden interest in long-forgotten public art by National District Mayor Roberto Salcedo. Clave Digital reports that murals will also be painted on overpasses in the city. The mayor's assistant, Nerys Martinez, indicated that there is not specific budgetary allocation for this project, as it is being paid for by sponsors. The art on Mirador Sur Park is being sponsored by Pinturas Tropical, Verizon and the National Lottery. The practice of mural painting is not new to Santo Domingo. Many buildings from the time of the Trujullo dictatorship bear murals by famous Spanish artist Jose Vela Zannetti. Also, Silvano Lora painted several murals during the civil war of 1965. The public art at Mirador Sur Park is expected to be ready by 15 December. Participating artists include Jose Cestero, Alberto Bass, Jose Ramon, Guillo Perez, Angel Hache, Elsa Nunez, Aquiles Azar, Candido Bido, Soucy de Pellerano, Tony Capellan, Marianela Jimenez, Julio Susana, Bernardo Then, Julian Amado, Christian Tiburcio, Marcos Lluberes, Carmen de Poll, Ingrid Garcia, and Freddy Javier.
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