President Hipolito Mejia announced he would send Congress the tax reform bill received from the economic team of the PLD. Daniel Toribio, Juan Hernandez and Rafael Camilo of the PLD have basically taken the tax reform proposal that resulted from studies contracted by the Mejia administration to economic consultants. The primary change to this is that the PLD tax experts recommend the new government tax interest earnings. As reported in El Caribe, President Hipolito Mejia said he would send the bill as received to Congress, as agreed with the International Monetary Fund that is requiring new sources of funds in order to resume the standby agreement currently suspended due to governmental overspending. For the bill to be approved in Congress, it needs the endorsement of the PPH-PRD faction, or the Mejia administration group, that forms the majority. The tax reform is a matter of much controversy, however, as many sectors are criticizing the PLD for endorsing a reform that would effectively place the burden of the current administration?s economic gaffes on the shoulders of the traditional taxpaying sectors of the population. The PLD won the election on 16 May on the population?s rejection of economic policies implemented by the Mejia government. It is yet to be seen if this fiscal reform package would pass in Congress.
El Caribe?s editorial today remarks that it hopes that members of Congress, when evaluating the proposal, are mindful of principles necessary for a good reform: equity, ease of application, simplicity of taxes, elimination of distortions and an even hand for the various sectors.
The proposal seeks to add RD$22 billion to government revenues, including RD$7 billion this same year to compensate for governmental overspending earlier in the year.
Technical Secretary of the Presidency Carlos Despradel said that there is resistance among business groups to the new taxes, but in his opinion it is the only way to eliminate the gap between revenues and spending that is required by the International Monetary Fund. Despradel told Hoy newspaper from the Presidential Palace that the RD$22-billion gap would be very difficult close by only reducing state expenditures and eliminating all subsidies to the electricity sector, much less now that petroleum prices are US$40 per barrel. ?There will have to be an increase in revenues by way of taxes,? he said. ?What is up for discussion is who will pay those taxes.?
Despradel highlighted that the banks don?t want to penalize savings, telecom companies do not want to penalize their consumers and the rum, beer and cigarette manufacturers do not want their items to sell at higher prices. ?Everyone wants the problems to be resolved without it affecting their sector,? he said.
Hoy newspaper?s Coctelera column comments that once the bill gets to Congress, the local business lobby groups, including the banks, will get to work.
The position of the National Council of Business (CONEP, the leading business lobby group) is that the focus has merely been on increasing revenues for the state. As reported in El Caribe, CONEP wants to see the tax reform focus on the reasons and causes for the present crisis. CONEP?s leader, Elena Viyella de Paliza, said that the tax reform should be taken advantage of to reduce the size of the state and carry out a program of austerity in government spending, along with commitments for transparency and state reform.