Labor unions are opposing the application of 8% VAT (ITBIS) to basic goods currently not covered by the tax, whereas Finance Minister Vicente Bengoa said the government would study the proposal made by the National Private Business Council (CONEP), as reported in Diario Libre. Bengoa said that the government would study proposals and suggestions resulting from consultations with all sectors regarding the tax reform, due to be sent to Congress on an unspecified date. The International Monetary Fund (IMF) requires that the draft of the reform should be ready by next September. The reform is aimed at making the country more competitive when the DR-CAFTA agreement comes into effect. El Caribe reports that CONEP’s members have not yet discussed the proposal to tax basic goods with 8% VAT.
The president of the Association of Industrial Businesses of Herrera (AEIH), Ernesto Villalta, said that his organization’s position is that unprocessed agricultural products, health services and education should not be taxed by the VAT. Currently, these goods and services are exempt from the tax.
At a meeting held by President Fernandez and the members of the National Dialogue, CONEP president Elena Viyella de Paliza suggested that basic goods and services should be taxed at fifty per cent of the current VAT, that is 8%, and advocated the expansion of the tax to all other goods and services (see DR1 News 23 June 2005). This is meant to compensate for the income that will no longer be generated when the 13% exchange commission is removed. The government has not come forth with an alternative program for reducing its spending, and talks rather have focused on enabling the government to maintain the present recognized high level of employment and other spending chapters.
Meanwhile, the president of the Chamber of Deputies, Alfredo Pacheco, opposes a new tax reform without consensus for the application of the proposed 8% VAT on basic goods and services.
The proposal is also opposed by the Center of Social Studies Padre Juan Montalvo and the Center of Caribbean Economic Investigation (CIECA).