El Caribe reports today that the government has agreed to increase taxes on food and medicines to compensate for less customs revenues once the Free Trade Agreement with the United States goes into effect. The loss of revenue is estimated at RD$500 million. While the agreement is slated to go into effect in 2005, there is talk that it could be delayed. As per the agreement, the government also committed to include all items (including food and medicines) under the ITBIS tax, increase the ITBIS to 15%, and luxury taxed items, as well as to strengthen supervision so as to reduce fiscal evasion. To do so, the government has undertaken to establish fiscal evasion as a criminal offense. Likewise, the government pledged to cut spending to 2% of the Gross Domestic Product, or RD$12.4 billion. New taxes would bring in RD$3 billion. The government also accepted to send a tax reform package to Congress that would eliminate subsidies to gas and power for those businesses and residential consumers considered big consumers.
For more on the IMF agreement, see http://dr1.com/news/2004/IMF_II_summary.pdf