The growth of the formal shopping sector in the Dominican Republic has been hampered by informality, according to executives of the National Organization of Commercial Enterprises (Onec), as reported in Hoy.
[The Onec executives did not directly pinpoint during the published interview the impact of Chinese invcestments here. Yet, the reality is that mega stores have surged taking advantage of tax loopholes allowed by the Abinader administration. Most of these stores are Chinese investments.]
During their participation in the Economic Encounter of Hoy newspaper, Onec president Mario Lama, vice president Ernesto Martínez Staffeld, executive director Jenniffer Troncoso, and Onec board member Guillermo Prida asserted that several factors have contributed to the slow growth of formal commerce last year, with informality being the primary culprit.
They argued that at a time when the tax burden increases for formal businesses, operating informally becomes more appealing. This situation negatively impacts the state due to reduced revenue and hinders the creation of quality jobs.
The Onec representatives highlighted that the commercial sector is the largest contributor to the treasury, estimated to be more than RD$59.98 billion, representing 15% of the tax burden on businesses. This surpasses the financial sector, which ranks second.
Moreover, the commercial sector generates 965,854 jobs, making it the largest contributor to the Social Security System and the National Institute of Technical Professional Training (Infotep). However, they pointed out that only 354,214 of those jobs are formal.
Among the challenges faced by formal commerce, they cited unfair practices and tax-exempt imports by large international companies, as well as those entering the country through moving or shipping services.
Unfair practices include customs undervaluation, non-compliance with tax obligations (such as issuing electronic invoices and processing cash payments or bank transfers), construction of premises without adhering to regulations, and non-compliance with labor and immigration regulations.
These practices negatively affect the health and lives of Dominican consumers and pose a threat to the sustainability of the commercial sector, resulting in significant losses for the State due to unpaid taxes.
The Onec executives also raised concerns about imports by large international companies that are exempt from taxes, which puts Dominican businesses at a disadvantage. These local businesses are subject to taxes, generate local employment, make investments, and stimulate the Dominican economy.
Regarding door-to-door shipping services, often from New York and Miami, they noted that these businesses import products that are either prohibited or subject to taxation through their “moving” service.
They clarified that there is no tax exemption for these services. Instead, they argued that it is a distortion of the exemptions provided by Law 14-93, Article 13, amended by Law 146-00, for Dominicans residing abroad who come to establish residence in the country.
The Onec spokespeople call for actions aimed at combating informality in commerce, which affects the competitiveness of businesses operating legitimately.
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Hoy
11 February 2025