It is becoming clearly apparent that the Dominican Chamber of Deputies is stalled over the government’s requirement to broaden the VAT tax base to include cooking oils, sugar and coffee, among other things. Diario Libre says that Alfredo Pacheco, the chamber president, has confirmed the stalemate. He said that the difference between the addition of the basic foodstuffs and the exclusion of the same represents between RD$6.0 billion and RD$7.0 billion for the new tax proposal. New proposals from government technicians are being studied by the special committee from the Chamber of Deputies. He did not reveal just what the new suggestions might be. Hoy newspaper reports that the differences between the two sides may well be in the neighborhood of RD$8.0 billion for the new budget, if basic foodstuffs are excluded. According to statement made by Pacheco on the television program “D’Agenda”, the government wants to include disposable diapers, coffee, sugar, cooking oil and pig and poultry feeds within VAT.
However, there are more difficult issues on the horizon. Listin Diario reports that without the final approval of the tax package the Dominican Republic cannot enter into CAFTA. This is because failure to approve the tax package will knock out the possibility of approving the 2006 budget, and this, in turn, will oblige the government to continue operating under the 2005 budget laws, which include the discretional use of budget surpluses. However, within the framework of the IMF accords, the government promised to have the 2006 budget in Congress by the middle of this month, and the new budget proposal has to include severe limits on the use of discretionary funds resulting from budget surpluses. Under pressure from the IMF, the Executive Branch can only use 5% of current income surplus in a discretionary manner, and an additional 1% in case of natural disasters.