El Caribe newspaper looks into what the newly-approved tax reform bill will mean for their budgets. The newspaper says that the increase in the ITBIS sales tax from 12% to 16% translates into a 2.71% increase in the price of basic goods, such as certain processed food items, clothing, furniture, appliances, entertainment, telecommunications, legal services and even funeral services.
El Caribe says that Dominicans already fork over more than 25% of their present wages directly to taxes and estimates that the basic wage needed to live in the DR is now more than RD$16,000. As of October 2003, however, more than 2.7 million people (89.5% of all employees) were receiving wages that did not meet the cost of living, which at that time was estimated at RD$8,015, according to data from the Central Bank and the 1998 Home Budgets poll.
Following the recent appreciation of the peso on the exchange markets, some companies did not lower their prices accordingly, and now they may decide not to increase prices and absorb the ITBIS increase to compensate.
El Caribe says that if the new sales tax scheme is implemented, a beer sold in colmados would go from its present price of RD$45 to RD$49, and a pack of 20 cigarettes that sells for RD$20 would cost RD$24.
The legislation also mandates that residential, commercial and industrial properties now pay a 1% tax over a duty-free RD$5-million assessment. The fiscal package also establishes that real-estate rentals be taxed 10%. Telecommunications taxes are also increased by 10%, in addition to the 16% ITBIS tax assessed.
Check transactions are to be hit with a RD$1.50 fee for every RD$1,000 of their value issued to a third person. Electronic transfers will be taxed, but ATM withdrawals and credit card purchases will not.