The proposed law on industrial incentives, which is supposed to substitute the 25% surtax on soft drinks using subsidized, imported HFCS (corn syrup), will benefit all of the nation’s business, by allowing local producers to be more competitive in the global marketplace. Nevertheless, Internal Revenue director Juan Hernandez says the law may have serious implications regarding how much tax money is collected. Hernandez told Diario Libre reporters that official revenues would fall by RD$4.5 billion and require a modification of the 2005 Budget. The project, which was approved in its first reading in the Senate on Tuesday, will permit local manufacturers to deduct the VAT tax (ITBIS) and the exchange commission that they must pay on imported capital goods. The law will apply not only to the sugar producers but to all local industries. Hernandez met with representatives from the CONEP business council in order to explain his objections to the legislative proposal. CONEP has called the RD$206.7-billion budget “overblown.” El Caribe calls the proposed incentives a “fiscal sacrifice,” and notes that part of the problem is that the IMF has established a series of goals that are included in the present budget proposal, which would have to be modified if the tax breaks are given to the industrial sector as proposed. In his statement to the press, Hernandez said that the Senate proposal would create “chaos” within the tax collection agency, since not only would they have to return the taxes paid on raw materials already exonerated from duties, but also on containers and raw materials, no matter if they were destined for use in products subject to the VAT. The new legislative initiative was sponsored by Senator Ramon Alburquerque (PRD-Monte Plata) and, following a very heated debate in which Senate president Andres Bautista left the Chamber, the bill was accepted on the first reading. It is now scheduled to be sent next Wednesday to a special commission that will study the project, endorse it and forward it to the Chamber of Deputies for final approval. The proposal, intended to assist the sugar sector affected by the elimination of the 25% tariff on HFCS, says that “all imports on capital goods in general, including, but not limited to machinery, equipment and installations brought into the country will be exempt from payment of the exchange commission or any other similar tax that is established.”