Writing in Diario Libre today, Tuesday 16 April, economist Eduardo Garcia Michel focuses on the amazing contracts that were underwritten during the Leonel Fernandez government. He singles out the construction of the Las Americas-Rincon de Molenillo and Boulevar del Atlantico toll roads for Samana, the Barrick Gold contract, the Bahia de las Aguilas contracting, and the Pinalito Hydroelectric plant.
He says that in the case of the Samana toll roads the government has had to pay extra because the contract established a minimum revenues level, which obliges the government to make payments if this minimum is not reached. In 2012, the government had to pay RD$1.8 billion because the tolls were not enough. He writes that the high tolls work against the tourist flow to Samana.
In the case of Barrick Gold, he writes that the contract modified the one that had been signed with Placer Dome that was the result of an international tender. He says that the new contract broke the rules of the game and judicial security. He says the clauses are so generous and the benefits for the state so little they are embarrassing.
In the case of Bahia de las Aguilas he said this is one of the most crude and shameless maneuvers to appropriate public land, that to make matters worse, is part of the national protected areas.
In the case of the Pinalito Hydroelectric plant, built at a cost of more than US$400 million, in an area where the source of water is clearly inadequate, an eight-kilometer tunnel was built to transport the negligible flow.
He says there are many more cases. “They are part of a long tradition from which formidable fortunes have come forth.”
He also points out that in 2012 there were imports of tax-free goods, including the ITBIS and customs taxes for US$1.93 billion, compared to US$1 billion in 2011.
“Not only the treasury is affected. Distortions are generated that affect free markets and discourage the true entrepreneurs, the innovators, because they have to use their time to fight against the windmills.”
Garcia Michel writes that all this has a solution. “It is very simple: no new contract in which the state participates should include concessions, exemptions or privileges, regardless of how minimal they may be.”
He said that anyone who wants to negotiate with the state would have to accept the present tax regime. If the tax regime is not attractive, then the solution is to modify it, and not change it to suit particular interests, he writes.
“That would help, first the public finances, because tax collections would increase, and secondly, the economy, because it would enable a more appropriate allotment of resources. And third, it would level the playing field so that all can participate. Fourth, it would be a formidable deterrent to corruption. And fifth, it would avoid another taxation reform in the near future.”
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