A preliminary draft of the letter of intent to resume the stand-by arrangement with the International Monetary Fund commits the government to perform a second fiscal reform in June 2005, which would require congressional approval by October 2005. The reform would encompass a gradual elimination of the exchange surcharge, a reduction of taxes on financial transactions, a lesser number of items exempt from the ITBIS sales tax, an expansion of the tax base for income tax to disallow claims of interest earned by individuals and the elimination of the special tax regimes and tax exemptions for free zones, hotels and the border provinces.
The IMF is also asking that a bill be submitted to modify the government’s spending habits, the way the budget is prepared and other matters to do with the management of the government’s finances. Further measures to control government spending will also be implemented.