The Dominican Ambassador to the World Trade Organization, Federico Cuello Camilo, says the DR needs to decide within the next two years what to do with its free zone industry. In an interview with El Caribe newspaper, he said that under our commitments to the WTO, the nation has two options: eliminate the special tax and duty-free treatment granted to industrial free zones; or convert the entire DR into a free zone. “The idea is to reduce to a minimum the taxes on inputs, but this would be applicable to all production, not only that in free zones,” he explained. This would also come with a reduction in the minimum income tax, he said. This way the DR would be able to maintain adequate levels of foreign investment. He explained the idea came from a luncheon he attended with the Minister of Foreign Relations of Costa Rica and the WTO ambassadors from Central America in Geneva. He said the Costa Rican minister envisions a 5% income tax. Cuello says that this is a big change, but he feels if it is applied to all sectors of the economy, it could result in increased tax collections. “Nobody is going to have the least problem paying 5% tax, versus the present levels of 20-28% in Central America,” he said. In the DR income tax is 25%. He said that since Costa Rica is studying the scheme, the DR, which has a free trade agreement with Central America, should seriously do the same. He explained Central America competes for the same free zone contracts. He commented that this should be studied by the commission created by the Executive Branch to reform the free zone law.
