On Friday, the 2% tax on imports will cease to be in effect, but the government is not willing to give up this income. As a result, the Monetary Board approved a 3% increase in the commission charged on hard currency transactions and known as the “exchange commission tax”.
The exchange commission tax, which has already risen from 5% to 10% earlier this year, will now go to 13% of the dollars used to bring in all imported goods.
Finance Minister Vicente Bengoa told El Caribe reporter Idonelia Perez Blanco that in real terms this only means a 1% increase for the importers, since the reduction of the temporary 2% tax only leaves the 3% increase in the exchange commission tax, as he explained it.
Bengoa also said that this move was in accordance with what the IMF had drawn out as part of the Dominican recovery program. However, late last November, the World Trade Organization (WTO) had decreed, in the case brought before it by Honduras, that the exchange tax was “inconsistent” with Article II of the General Agreement on Tariffs. For the IMF, the tax is not a control on currency exchange.
Former CONEP president, Celso Marranzini, told the reporter that these measure are counterproductive with regards to Dominican competition in the global marketplace. Marranzini also said that the new measure was a way for the government to assess taxes without going through the Congress. The tax began in 1991 at 2.5%. Then in 1997 it was set at 1.5%. In July of 1998, the tax went to 1.75%, and then in October of 1999 it hit 5%. Amid a series of political promises to get rid of the tax, in September of 2001 the tax was lowered to 4.75% before increasing it to 10% in August of 2002.