The implementation of Tax Reform Law 288-04, which upped the ITBIS sales tax from 12% to 16% and imposed increased luxury taxes (Impuesto Selectivo al Consumo), left its mark on the inflation rate in October. The Central Bank reported that inflation rose 1.35% for the month, with accumulated inflation for the first 10 months of the year hovering at 32.88%. The tax reform is being attributed with 4.15% of the inflation experienced, but given the decline in the exchange rate, this impact was conceivably a lesser rate of 2.8%.
The Central Bank predicts a record-high year-end inflation of 36%. Such elevated inflation was last felt in the DR in 1990 when it peaked at 50%.