The Fernandez government is objecting to the Senate’s approval of a bill that reduces the amount of taxes to be paid by the agribusiness sector, as part of the conciliatory measures being developed for the sugar industry. These negotiations aim to appease the powerful lobby into accepting the removal of the controversial surcharge on future corn syrup imports, which is currently providing an obstacle to the passage of the Free Trade Agreement with the United States. The director of the Tax Department, Juan Hernandez, and the director of Customs, Miguel Cocco, were scheduled to visit the Senate today to discuss the implications of what they feel would entail a multi-bilion reduction in government collections now if the compensation package is passed.
The director of the National Planning Office, Guarocuya Feliz, and the representative of the International Monetary Fund in the Dominican Republic, Ousmene Mandeng, met with the Chamber of Deputies to discuss the 2005 budget and the corn syrup dispute. Mandeng stated that the compensatory project contradicts the tax reform passed in September to cover the government deficit. The deficit was the result of overspending and mismanagement of the banking crisis by the previous government. Dominican taxpayers fit the bill for the crisis in new taxes and inflation. Mandeng, as reported in Diario Libre, nevertheless says that the compensation package could impede the signing of the IMF Stand By Agreement that would inject fresh resources into the country, most of which would be used to pay for the foreign debt that doubled during the past administration.
Mandeng said that if new sources of funds could not be found, expenses would have to be cut, a solution that does not have the favor of legislators and government.
On the contrary, the legislators want to impose the 30% wage increase given to public sector employees in January in one shot, not split into two with one increase scheduled for January and the other in July.
The Tax Department says the government stands to lose RD$4.5 billion if the sugar compensation bill goes through, while a consultancy firm hired by the Senate indicates that amount would be closer to RD$831.5 million.
The National Council of Business and the Association of Industries of the Dominican Republic are backing the compensation package for the farming sector as a whole, on grounds of the need to make the sector competitive.
A recent Listin Diario editorial highlighted that Dominican producers pay 31% in taxes on imported machinery and equipment for farming, compared to 2% in Honduras, 1% in Costa Rica, 13% in El Salvador, 15% in Nicaragua and 12% in Guatemala.
Dominicans pay the highest value-added tax in the region (16%) and must fork over a very high 10% exchange commission on imports (only Honduras has a similar tax, but of a much lesser 1.5%), among other taxes.
Jorge Ivan Ramirez, of Verizon, president of the American Chamber of Commerce, favored that the reduction in taxes be carried out in a gradual manner. The American Chamber of Commerce has been one of the most vocal defenders of the Free Trade Agreement with the United States.
Meanwhile, Ramon Menendez and Irving Redondo of Central Romana Corporation met yesterday with the Senate, and argued that what they are requesting are measures that would enable the industrial sector to be more competitive. Senate president Andres Bautista said, however, that the compensation package devised by Senator Ramon Alburquerque (PRD-Monte Plata) does not benefit all members of the agribusiness sector. He stated that the benefits of the bill that was approved in a first reading in the Senate need to be extended to the entire agricultural sector, namely those who produce rice, tobacco, corn, producers of poultry and other meat products.