Telecommunication industry representatives rejected the notion that the government should levy a selective luxury tax on telecommunications. Apparently seeking to close the fiscal gap at any cost, the authorities are reportedly considering increasing telecommunications surcharges across the country. In an interview yesterday with Hoy newspaper, representatives for the four local telecommunication companies ? Verizon, Orange, Tricom and Centennial ? rebuffed the proposal. They said the fiscal reform proposal would amount to an increase of the tax burden on telecommunications to 40%. The group, which comprised Freddy Dominguez for Verizon, Pierre Yves Janin for Orange, Carl Carlson for Tricom, and Raul Salvado for Centennial, warned that these new taxes would distort the market and directly affect consumers. Dominguez said that for every peso that enters the industry, 28 cents return to the state. He said the proposal to hit the industry with yet more taxes goes against the global trend of stimulating the sector as a backbone for the development of tourism, manufacturing and other sectors. Dominguez said that the tax reform is being seen as urgent to solve a problem created by the banking crisis and the quasi-fiscal debt of the Central Bank. But, he wondered, where are the guarantees that such a situation will not recur?
The Verizon official said that the principal responsibility of the government is to maintain macroeconomic stability in the country. ?We have a Central Bank that is very vocal, perhaps the most vocal in the world, where central bankers are usually conservative when speaking to the public and appearing in the media,? he stated. ?Here, they talk about everything, with the exception of what they will do to achieve price stability, which is their legal mandate,? he said.
?I think we are being targeted for that tax because of the theory of the low-lying mangos, because, since we are a very regulated industry, our income is transparent and they only see the fiscal part of the picture,? said Tricom?s Carlson. The telecom industry in the DR, according to him, would be the most highly taxed in Latin America, affecting the advantage the country has had in the healthy competition existing in the sector.
?Tax reforms are normally carried out in times of bonanza, when there is stability, so that with a reasonably balanced budget, it is evident who should contribute a bit more or a bit less to the economy,? said Salvado of Centennial. He said that in the DR tax system it is those who do pay who are always targeted by the government when it needs more revenues.
?The tax reform proposal is nothing but a scheme to gather more taxes to fill a gap, by increasing the burden on those who normally pay,? said Salvado. In his opinion, the upcoming fiscal reform should broaden the base and stimulate those who do not pay to contribute. He urged that it the new rules be more balanced in their distribution of the burden.
With the telecom sector one of the most dynamic in the Dominican Republic, Dominguez explained that during the 90s, the telecommunications sector accounted for 4% of the GDP, an amount which has now risen to 10%. ?We are talking 10% of an economy that is made up primarily by four large players,? he said.