If the VAT tax-base is amplified, the poorest 20% of the population will pay more in proportion to their income than the wealthiest 20%. El Caribe takes a look at this situation, and finds that the VAT (ITBIS in the local terminology) is the single largest income producer for the government. The tax on consumer items surpassed income tax as the largest source of government revenue over the first five months of 2004. In heated statements before the finance commission of the Chamber of Deputies, entities such as the Center for Economic Research in the Caribbean (CIECA) and the Father Juan Montalvo Center have bitterly opposes the broadening of the VAT tax base, citing the increased burden on the least-advantaged sectors of the population. Even PLD party spokesperson, acting under orders from President-elect Leonel Fernandez, have come out against the move to add more items to the list of taxable items. The PLD is supporting a tax increase to 16%, but not the addition of more items. On the other side of the argument is the IMF proposal that does, indeed, add more items to the tax coverage, as well as the proposals of the CONEP and the ANJE, which coincide with the IMF?s ideas. Also in favor of a widened tax base are the National Center for Tax Research and the Economic and Development Foundation. The latter has proposed a two-tier system with the current items to be charged 16% and additional items to be taxed at a rate of 8%. A study that looked at the economic impact of a higher VAT tax, performed by economists Pavel Isa Contreras and Edgar Morales, demonstrated that the poor would see a 7.29% increase in their cost of living, but a figure three times less than that for the wealthiest 20%. To support this theory the economists indicated that the poorest 20% of the population would pay 2.08% of their income in VAT taxes while the rich would pay 2.04% of their income for the same tax. The poorest 20%, however, spend 60% of their income on items that are exempted from the VAT tax under the current laws, while the rich spend only 23.8% of their income on those items. In the area of ?food, beverages and tobacco? alone, the study showed that the poor spend an average of 41.31% on these items on which the wealthy spend 6.83%. No matter which of the scenarios being proposed by the lobbyists takes effect, the poorest 20% will be seriously affected.