The tax reform proposal continues to dominate the news, with the IMF, the United States Department of Commerce, the PRD and the government all expressing opinions and demands. Jose Fajgenbaum, the IMF representative in the DR, has asked Congress not to change the legislation that the government has submitted for the tax reforms program. He said that any changes would reduce the Executive Branch’s ability to carry out “programs and force the government to cut spending on programs that are needed at this time”. In response, Alfredo Pacheco, the president of the Chamber of Deputies, said that the chamber is always willing to listen to new proposals and work towards reconciling differences of opinion. Fajgenbaum told reporters that the “reform will not create new taxes, it will simply substitute one tax for another.” Fajgenbaum and Temistocles Montas were speaking to reporters after a long meeting with the government’s economic team. Montas, the chief of the economic team, told reporters that the IMF team is looking at the third Letter of Intent and had reviewed all aspects of the Dominican economy, according to El Caribe. Over at the Congress, Pacheco was faced with statements by the government and the IMF that said that the RD$7.0 billion in tax cuts made by the Chamber of Deputies would create fiscal instability and serious problems for the government next year. Marino Collante, who heads the Chamber’s Finance Committee told Hoy reporters that all the figures that have been published in the newspapers are “speculations”, but Pacheco reaffirmed the RD$7.0 billion number. The Chamber of Deputies leader had told the press that only RD$25.3 billion of the proposed RD$32 billion would be approved during tomorrow’s session. The substantial reduction was due to the removal of several basic commodities from the VAT list. (See DR1 news for Friday, 18 November 2005). In his statements, Marino Collante said that he was confident that the tax reform bill would be passed in time for the Dominican Republic to enter the DR-CAFTA agreement. Pacheco emphasized that even the RD$25.3 billion tax deal meant a lot of sacrifices for many sectors of the population.
Making things more “interesting” was the report from the PRD economic team, which differed greatly from what government sources were reporting. As reported in Hoy newspaper, the PRD’s calculations show that the government says, for example, that the removal of the exchange commission tax – a 13% tax on the dollars used to purchase imports – will cost the treasury RD$21.0 billion in income. The PRD figures say that the real loss is closer to RD$18.9 billion, and so on down the line of projected government tax losses with the DR-CAFTA program. The government figure of RD$32.0 billion is, according to the PRD economic team, much closer to RD$22.3 billion. The PRD economic team of Jaime Aristy Escuder, Andres Dauhajre, Rafael Espinal, Arturo Martinez Moya, Francisco Guerrero Prats and Jose Lois Malkum told Hoy reporters that the government was inflating the estimated tax losses, and concentrating its efforts on income instead of looking at spending cuts. Finally, today’s Listin Diario reports that the United States Department of Commerce has voiced objections to the proposed 2% pre-import tax. This tax is part of the tax reform proposals. The Department of Commerce says that the tax is a violation of articles II and III of that General Agreement on Taxes and Tariffs (GATT), as well in violation of articles 3 and 3.10 of the DR-CAFTA agreement. According to “sources”, the Department of Commerce will cite law 109-53, which sets out the requirements for the implementation of the DR-CAFTA agreement, and recommend to President George W. Bush that the Dominican Republic is failing to fulfill its part if such a tax is implemented.