Hoy newspaper quotes Finance Minister Rafael Calderon as saying that the country is in urgent need of fiscal reform. Such reform would need to be effective in the fight against tax evasion, which he said was widespread in the Dominican Republic. “We cannot go on creating new taxes and raising the current rates, at the expense of those who pay, while others pay nothing or not enough,” he said. In Calderon’s opinion, tax evasion is almost routine and many business charge their customers ITBIS (value-added tax), but do not declare the full extent of their incomes. Government income is above target, said Calderon, saying that the quasi-fiscal deficit was a consequence of non-payment of taxes: fiscal income for this year had been estimated at RD$5.8 billion yet only RD$1.1 has come in.
El Caribe says that according to economists, the Dominican Republic enjoys one of the lowest tax burdens in the world, at an approximate rate of 16%. The newspaper proceeds, however, to make its own calculations based on a middle-income family’s monthly RD$20,000 income. It estimates the average employee’s tax bill at 25% of their revenue, taking into account regular expenditures such as fuel, vehicle license plates and ITBIS paid on purchases. Added to this are taxes on life’s small indulgences, such the occasional meal in a restaurant and a modest amount of alcohol and tobacco, which further reduce the family’s net income to just over RD$15,000. Most of these taxes are almost impossible to dodge. The newspaper quotes Felipe Hernandez Paulus, president of the Dominican Tributary Foundation, who says that the government’s own track-record on management and transparency acts as a disincentive for ordinary citizens to declare their full earnings.