Experts warn that a simple name change from the ITBIS (Impuesto a la Transferencia de Bienes Industrializados y Servicios) to VAT (Value Added Tax) could create legal loopholes and leave certain sectors without tax obligations, El Caribe reports.
The proposal to rename the ITBIS to VAT within the Abinader administration’s Tax Modernization Bill under study in Congress may involve more than just a simple change of words, potentially leading to unforeseen complications, the story in El Caribe explains.
Economists Magín Díaz and Edgar Morales were asked: How will this transition occur, and what adjustments will it entail? Díaz said that, in principle, this seemingly simple change could complicate matters, as the Ministry of Hacienda appears focused solely on changing the name rather than addressing underlying issues.
Morales explained that the term “ITBIS” specifically refers to the transfer of industrialized goods and services, and changing it to “VAT” raises questions about the tax status of certain goods that might fall outside the new definition.
“Accountingly, nothing changes because the ITBIS is a VAT-type tax,” Morales said. “That’s cosmetic. But what’s not cosmetic is having to redefine what an industrialized good is and explain what a non-industrialized good is.”
He added, “Taxes have a scope; there are exempt goods and goods that are not subject to the tax. When we replace ITBIS with VAT and remove the ‘industrialized’ qualifier, it means that there are goods that are not currently exempt, but simply not covered by the tax.”
Morales cited real estate, intangible assets, and financial assets as examples of goods that are not currently categorized under the ITBIS.
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El Caribe
17 October 2024