The National Business Council (CONEP) has given up its quest for consensus after it became evident that a functional mechanism for the exclusion of an increase of the tax applied to diesel used by industries that generate their own energy would not be found, according to Clave Digital. None of the parties could present a formula that would allow the exclusion of this tax. CONEP’s withdrawal leaves the final decision on the bill, which will be voted on again today, to government representative, led by Presidential Technical Secretary Temistocles Montas, and the Chamber of Deputies Finance Commission led by Marino Collante.
Listin Diario reports that the government, CONEP and the Chamber of Deputies held talks yesterday with the mediation of the National Dialogue Office, and agreed to present a new tax reform bill with collections amounting to RD$3 billion less than originally requested by the government. The bill’s estimated collections will drop from RD$32 billion to RD$29 billion. Collante said that the bill is on today’s agenda for approval by a second vote in the Chamber of Deputies, after which it would be sent to the Senate. Collante said the tax on diesel would be maintained, as it is impossible to identify sources for the RD$4 billion excluded in favor of the agribusiness sector. CONEP had objected to the tax on diesel and the application of VAT (ITBIS) to finished products, a decision which it left for the government and Congres to make. The change to the bill includes a paragraph that issues a tax credit to 52 generating companies that are not connected to the national energy system so that they do not have to pay the increased tax on diesel. These companies use up more than 15 MW. The credit excludes hotels, which consume less than 5 MW, according to an unnamed source. Montas stated that the diesel tax would generate approximately RD$3 billion. The Association of Industries was not represented at the meeting. The changes also include a 29% income tax (instead of 30%), and a paragraph excluding the 1.5% anticipated tax on gross sales. Income tax would be reduced to 28% in 2007; to 26% in 2008 and would return to 25% in 2009. The Association of Industries of Herrera (AEIH) warned that the revised reform would make productive sectors less competitive and would require additional taxation changes within a few months. Engineer Ernesto Vilalta classified the bill as a “fiscal mess”, stating that the tax on diesel would increase transportation costs, which would have an impact on prices and make local products less competitive than international products.
Diario Libre indicates that the business sector withdrew from the negotiations, upset that the tax for diesel used in electricity generation would be maintained for companies that use less that 15 MW. Despite this objection, the Chamber of Deputies will vote again on the tax reform today. The final version contemplates the 29% income tax rate and a 70% current differential applied to diesel for general use, and an anticipated 1.5% tax on gross sales for companies with more than a RD$5 million monthly turnover. Also included is a 17% tax on the registration and license plate of recently imported vehicles and the exemption of VAT (ITBIS) for several products, and agricultural machinery and raw materials.
El Caribe reports that stress and fatigue characterized the negotiations between the government, the Deputies and the business sector, which went on for three hours yesterday at Pontificia Universidad Catolica Madre y Maestra (PUCMM). Neither the industrial sector nor small businesses were represented at this meeting. No consensus was reached on the increase of the tax on diesel.
Meanwhile, PRD President Ramon Alburquerque said that the government would have to desist from taxing diesel if it wants the tax reform to pass. He emphasized that the PRD opposes any tax that would affect the middle class and consumers.