Finance Minister Vicente Bengoa, Customs Director Miguel Cocco and director of Internal Revenues Juan Hernandez have asked the Senate to approve the tax reform bill as received from the Chamber of Deputies. As it currently stands, the bill includes a controversial 25% surcharge on corn syrup imports, which was lobbied for by the local sugar industry and which would modify the terms established in the free trade agreement (DR-CAFTA) signed with the United States. The sugar industrialists say that the cheaper sweetener would be more attractive to local soft drink and juice manufacturers because of its lower cost and thus would undermine their profitability as an industry. At the present time, the sugar producing industry (made up by two sugar producers) holds a monopoly on sugar sales in the DR, which in turn affects the competitiveness of other industries that use sweeteners as an input material. Legislators have chose to ignore this sector of industrialists in their quest to protect the sugar industry from the US import.
Sugar lobbyists have secured the support of a majority of deputies, who say that if the surcharge is removed by the Senate, they will reinstate it once the bill returns to the lower house, as reported in Hoy newspaper.
The surcharge is furthermore being disputed by the US Trade Representative’s Office on the grounds that it violates the DR-CAFTA and other trade agreements accorded between the DR and the World Trade Organization. The USTR say that the imposition of the surcharge would indefinitely suspend the DR-CAFTA.
If the bill is again modified, it would need to be sent back to the Chamber of Deputies, thereby further delaying its passage. The new fiscal package will mean an increase in taxes on most goods sold in the Dominican Republic and is expected to bring a windfall of fresh resources to the new government, as well as open the doors to new financial assistance from the International Monetary Fund, the World Bank and the Interamerican Development Bank.
Minister Bengoa proposed that the bill be approved as is, with the government to send another bill to Congress to propose the elimination of the 25% corn syrup surcharge.
Economist Rafael Camilo, the current superintendent of banks, also commented that the inclusion of the surcharge to protect local producers generates a conflict that should have been discussed at the negotiations table outside of Congress. He expressed the importance of approving the tax reform swiftly in order to resume the IMF stand by agreement. The government expects the IMF agreement to be extended to two years, and a mission recently traveled to Washington, DC for these talks.