The World Bank presented findings on 17 January 2018, of a new report that proposes alternatives to the Tax Agency (DGII) for increasing fiscal efficiency and public revenues, while at the same time not affecting inclusive growth and the competitive business climate.
The proposal includes more effective policies to increase tax revenue, better targeting of fiscal spending to benefit the poorest, and an increase of the tax base to reduce the informal economy, said Alessandro Legrottaglie, World Bank Country Manager upon presenting the report “Gearing up for a More Efficient Tax System in the Dominican Republic.”
The report highlights that losses in tax collection in the Dominican Republic caused by fiscal evasion, fraud, and poor management of the Transfer of Industrialized Goods and Services Tax (ITBIS, in Spanish), are among the largest in Latin America and the Caribbean. In a press release, the World Bank argues that despite the high growth rate experienced by the country tax revenues at 13.4% of GDO are below the 14.3% regional average.
The World Bank experts favor cuts to the exemptions to ITBIS (the country’s VAT), preferential fuel subsidies, real estate deductions and corporate tax incentives. Researchers say that the high rates of labor employed in the informal sector also results in government losses in personal income taxes estimated at close to one third of a GDP percentage point.
The report recommends the tax agency to continue improving management and reducing fraud by strengthening the use of ICT to reinforce tax administration.
The Medina administration is behind schedule in completing the fiscal agreement that the National Development Strategy Law ordered be carried out.
Magin Diaz (recently appointed to the DGII) said there was not a need to increase taxes, but rather to be more efficient in collecting taxes already on the books. Increasing tax revenue through improved collection strategies has been successful. For 2017, both the DGII and the Customs Agency (DGA) announced surplus in tax collections and reaching the goals for the year.
Business groups are wary of more taxes on grounds that there are many sectors where there are no checks and controls. Former president of the National Business Council, Celso Marranzini recently complained that highly profitable political parties have skirted accountability despite using public funds, while businesses are subject to intense scrutiny and taxation.
Read more:
World Bank study
Diario Libre
18 January 2018
