The Medina administration has announced it aims to collect RD$53 billion in additional revenues in 2013 with a series of new tax measures. The government says that this would increase the tax burden from 13 to 15%.
Making the announcement, President Danilo Medina said the government and private sector will need to support each other, he added. In his official statement, the President said: “The reality is tough. At this time the efforts and sacrifice of all is required so we can re channel the country towards times of growth and sustained development.”
Minister of Economy and Planning Temistocles Montas said the central government would end the year with a fiscal deficit of RD$148 billion, equivalent to 6.5% of GDP.
But the deficit will increase to RD$170 billion when adding in autonomous institutions of the state and the Central Bank’s quasi-fiscal deficit, for an overall 8% GDP deficit.
The proposal for taxation changes to be sent to Congress for passing and including in the 2013 National Budget includes:
Tax on alcoholic beverages to go up from 7 to 15% with a quarterly inflation adjustment.
Non-governmental organizations would pay ITBIS.
Increase in the ITBIS tax from 16% to 18%.
Gradual taxation of foods that are today exempt ranging from 10% in January 2013, 12% in 2014, 14% in 2015 and 16% in 2016.
Christmas salaries for workers making more than RD$33,000 a month would now be taxed.
Vehicle owners need to pay 1% of their vehicle’s value instead of the annual renewal of vehicle stickers.
17% of the value of the vehicle tax for first vehicle registration, plus a charge for C02 emission per kilometer.
Telecom and cable TV services would be taxed 10%.
Dividends paid in the free zone sector will pay 10%, and free zone sector exemptions will gradually be reduced. Free zone sector sales would now pay 5% on gross sales, up from 2.5%.
Increase in the retention made to government suppliers from 3 to 5%.
Replace the luxury tax on property with a 1% on property value maintaining the present exemption of RD$5 million.
Elimination of the inflation adjustment on exempt income of employee wages.
Increase on the tax for property title transfer from 3 to 4.5%.
The DGII would start charging a mono-tax to informal workers.
The tax deductions granted to parents with children in school would be eliminated.
Art 39 tax incentives to the incipient film industry would be eliminated.
Tax incentives for Dominicans purchasing vacation homes would be eliminated, but are maintained for foreigners.
More goods will be taxed with the ITBIS that would be increased to a maximum 18%.
Other levies include 10% tax on interest payments and a 10% luxury tax on non-alcoholic beverages, with the exception of natural juices and natural water.
Classification of new companies in existing special tax regimes would be suspended until the Tax Code is reformed, with the exception of free zones, tourism, the film industry and border development.
The details were reported at the close of the meeting President Danilo Medina held with the Economic and Social Council (CES), the consulting body created in the 2010 Constitution.
The government also announced a freeze on public sector salaries and raises for government employees.
But at the same time, in keeping with its continued tendency towards political patronage, the PLD administration announced a RD$290.50 increase in Solidarity Program welfare cards per household, and extending them to 200,000 new households in 2013.
See the government taxation draft at http://app2.diariolibre.com/contenidodl/pdf/reformafiscal.pdf
www.presidencia.gov.do/comunicado/danilo-medina-dice-es-necesario-el-concurso-la-solidaridad-y-el-sacrificio-del-estado-y-del-sector-privado-para-reencauzar-economia/