Economist Frederic Emam Zade of the Fundacion Global Democracia y Desarrollo, President-elect Leonel Fernandez?s research center, would favor that the incoming government drastically cut spending and reduce taxes to alleviate the economic crisis. Contrary to those who advocate a new ?paqueton? of taxes, Emam Zade said that the majority of the Dominicans want the government to make reductions and submit itself to an austerity plan ?a la Balaguer,? while devising a prescription for less ?botellas? (sinecures) and applying the medicine of ?E? pa fuera que van,? the slogan on which the PLD won the recent election, to unproductive government jobs.
?The new package of taxes, in all versions presented, is similar to the nefast tax package of 2001 and its subsequent ?paquetico,? which were band-aid solutions for maintaining a policy of government spending and unsustainable government borrowing,? said Emam Zade.
He poses the question if the previous tax reform packages, namely the ?paquetazo? and the ?paquetico,? caused the collapse of the nation?s growth, several banks, the power sector and thousands of companies, then what effects would a larger, more in-depth package have?
As reported in Hoy newspaper, Emam Zade says that voters rejected the present government precisely because of the dismal results of its economic policies. ?Thus it is reasonable to expect that those opposition members of Congress who will seek to be reelected in 2006 will not risk their posts by increasing the taxes to the people, for which they could wind up getting themselves kicked out of the legislature, on the ?E? pa fuera en el 2006? slogan.
He said that no consumers, producers, workers or businesses can bear any more taxes and that everyone would like to see the government cuts its own spending instead.
In the opinion of the economist, neither the markets nor the international financial bodies are willing to continue financing the deficits of the Dominican government and said that present government economic policies have caused more than 600,000 employees to be let go, while more than half the population are now being categorized as below the poverty line.
?The new government can continue these policies or it can sacrifice 175,000 botellas,? he says. The elimination of these posts would not only entail savings on government payrolls, but also on all the additional expenditures connected to the cushy jobs (vehicles, cell phones, telecommunications costs, travel costs, etc).
Emam Zade says that the government can also save by dismantling the general subsidies, suspending certain public programs and temporarily closing government offices and ministries that today generate more problems than solutions.
In the past, Emam Zade has proposed a formula calling for a 10% ITBIS tax on all items, 10% income tax and 10% customs tax in order to increase tax collections and reduce the burden to consumers and business.
Diario Libre reported yesterday that the central government increased its spending on wages RD$1.6 billion during the first five months of this year. The government increased wages by 9%, or RD$870.3 million, leaving the remainder to create additional jobs in the public administration prior to the 16 May presidential election. Public sector wages thus increased 16.2% over those disbursed for the same period last year. The Mejia government spent RD$9.8 billion on fixed employee wages for the first five months of the year, up from RD$7.4 billion.