The giant beer, banking and tobacco conglomerate, E Leon Jimenes, now known as the ?Grupo Leon,? made its statement to the finance commission of the Chamber of Deputies yesterday. This was the official ?coming out? of the statements that were placed in all the nation?s newspapers last week. Basically, the proposals call for a 20% reduction in government spending, including salaries, in order to achieve a savings of RD$8 billion in the next year. The group also proposed a cap on the propane subsidy to the poor. This subsidy is given to the least-financially able 40% of the population, representing about 800,000 families in the Dominican Republic. According to the statement read before the commission, this step, along with a gradual decrease of 20% of the subsidy given to the energy sector, would represent another savings of RD$5.8 billion. The group suggested that keeping expenses within 50% of this year?s budget could save the country a further RD$10 billion. The sale of government assets in an orderly and transparent manner during the 2005-2008 period could also produce approximately RD$10 billion.
As far as taxes go, the Leon Group approve the 16% VAT tax for 2005, but want it lowered to 14% in 2006 and returned to 12% in 2007. From that point on, the tax base could be broadened and all items assessed a rate of 10%, with the understanding that basic food items would be exempt. According to their calculations, this could produce RD$8.7 billion for the government.
The proposals made to the finance commission received widespread attention in El Caribe and the Listin Diario, among other papers, because of the economic importance of the business entity.
Their proposals included a fixed tax on property, which, when adjusted for inflation, could produce RD$3 billion. A re-adjustment of the selective consumer tax on cigarettes and alcoholic beverages would take into consideration the recent loss of purchasing power of the Dominican peso.
In addition to these peso-saving mechanisms, Grupo Leon was also promoting a general 20% increase in the minimum wage in August and another 10% in April 2005. While the measure would cost the government an additional RD$2.7 billion in salaries, it would help re-activate the economy and place more purchasing power in the hands of the population. Moreover, the proposals of the group argued for tightened collection mechanisms, since it is widely held that over RD$10 billion in taxes are evaded each year. A tax amnesty proposal was included in order to stimulate larger collection ratios.
The Leon Group contributes 10% of taxes paid by businesses in the Dominican Republic.