Pedro Silverio, the director of the CenAntillas economic think tank and research center at the Pontificia Universidad Catolica Madre y Maestra, feels the government should pick up the bigger half of the tab for the economic crisis this time around. Writing for El Caribe newspaper, he says that over the past three years the private business sector and consumers in general have been penalized, while government has had a free hand at spending.
Silverio points out that many people are unaware of the surplus taxes produced for the government. Official statistics indicate that tax collections have exceeded RD$51 billion for the January to May period, which is RD$22 billion or 75% more than during the same period in 2003, and 15% more than what had been budgeted. He indicates that taxation revenues represent 20% more than inflation accumulated between June 2003 and May 2004. Thus, government returns are up in real terms. The amount includes the windfall RD$3 billion, product of the increased exit tax and new surcharges on exports and imports.
Silverio forecasts that if the trend in tax collections continues, and even if the transitory measures such as the export tax are dropped, official revenues could reach RD$120 billion by the end of this year, a 19% tax pressure. This amount does not include loans and donations that could add up to another RD$18 billion, for a total RD$140 billion.
He goes on to highlight that this reality contrasts, sadly, with the handling of government spending. The goal of a small surplus contemplated in the IMF agreement was not achieved, precisely due to excessive public spending. While data is not complete, he said the deficit could be around 2% of the central government?s operations. He mentions the spending spree incurred by the Mejia administration during the election campaign.
While the government did not exercise any discipline in spending, to put it nicely, consumers and investors were forced to finance this spending by paying new taxes, says Silverio. In closing, he asks: ?Should the reform be neutral or compensatory from a tax collection viewpoint? Amidst the reality of an extraordinary adjustment in tax revenues and excessive government spending, the answer is a ?yes?. Now is the time to make adjustments in government spending. Let?s not kill the chicken of the golden eggs.?