Trade unions, business associations, political leaders, and economists have voiced concern about the government’s failure to comply with a law on income tax adjustment passed in 1992. Article 327 of the new Dominican Tributary Code obliges the government to adjust annually the income tax wage brackets to compensate for the effect of inflation. In 1992, the government agreed to exempt those earning up to RD$60,000 from paying income taxes.
It was also decided that the Consumer Price Index of the Central Bank should be used as the indicator for the adjustments for inflation. The measure was intended to guard the workers’ real wages from being eroded. For four consecutive years the authorities have, however, applied 1992 data, and no adjustments have been made. In 1994 alone, the inflation rate reached 14 percent. As a result, workers’ real wages fell considerably.
Many critics argue that if the government abides by this law, the economy as a whole will benefit from the resulting increase in consumption. They also say that this attitude by the government in failing to honor the law is yet another indication of its lack of commitment to promote a sound regulatory environment. In the meantime, Dominican workers remain unprotected in a country where cost-of-living adjustments are virtually non-existent and wage increases are subject to protracted negotiations amongst representatives from the government, business associations, trade unions, and even the Catholic Church.