The President of the National Council of Private Enterprise (CONEP), Celso Marranzini Pérez, together with directors of the Federation of Industrial Associations (FAI), called on Congress to approve the tariff reform proposal sent to the legislative body last week by President Leonel Fernández. The tariff reforms, necessary if the Dominican Republic is to meet its free trade treaty obligations with Central America and the Caribbean Common Market (CARICOM), were characterized by Marranzini Pérez as necessary in order for DR industry to be competitive. The revenue loss for the government caused by the tariff cuts must be counterbalanced by increasing the Transfer Tax on Industrial Goods and Services (ITBIS). [President Fernández proposed raising ITBIS from its current 8% to 12% in 1999 and to 14% in the year 2000.] Such a tax rise would not be inflationary, argued Marranzini Pérez, because the tariff cuts foreseen would mean much lower prices for imported goods and goods made using imported inputs. The business groups pointedly did not endorse, however, the President’s proposal to significantly raise the Selective Consumption Tax on alcoholic beverages and tobacco products. They feel that such a targeted tax hike would seriously stunt sales in those sectors and harm important national industry. José Miguel Barceló, of the Barceló rum, says that everytime there has been a tax increase, there has been a decline in rum consumption. Meanwhile opposition figures continue to voice opposition to the tax proposals. Jacinto Peynado, a former Vice President, the Reformista (PRSC) presidential in 1996 and possibly the PRSC presidential candidate for the year 2000, said that he opposes the tax plan. Senate Vice President Jesús Vásquez Martínez (PRD-Maria Teresa Sánchez Province) said that raising the ITBIS to even 10% would create a "dangerous social explosion" in the DR. The President of the Chamber of Deputies, Peguero Méndez (PRD), reiterated that he thinks the debate should focus not on whether to increase ITBIS, but rather by how much. Last week he floated the idea that ITBIS be raised to 10% instead of the 12% sought by the Executive Branch. Any revenue shortfall remaining from the tariff cuts could be counterbalanced by an increase in taxes on luxury houses and capital gains, he further suggested yesterday. The existing tax level on both is too low, he said, and raising them instead of extra hikes in ITBIS would reduce the new tax burden on the poor. Local economist Jaime Aristy has pointed out that the increase in the ITBIS will not affect the nation’s poor, as most products consumed by this segment of the population are exempt of the tax.
