The Dominican IMF representative dislikes the proposed legislation that would provide tax incentives for the Dominican industrial sector to compensate for the removal of the 25% tax on soft drinks using HFCS (corn syrup). Economist Ruddy Santana calls the billion-peso tax relief package a “monstrous mistake.” Furthermore, Santana said that such a move would completely nullify the possibility of the Dominican Republic re-establishing its Stand-By Agreement with the IMF. Another result of such tax incentives, which would grant broad exemptions on certain taxes to industries, would be to preclude the possibility of World Bank, IADB or any other foreign capital reaching the DR. Santana told Hoy newspaper reporters that “the erroneous decision of the Senate throws away the great work done by the economic team, since it will produce a 0.5% decrease in the government’s GDP estimates as projected by the 2005 Budget.” In his written statement, Santana maintained that the former administration left the level of creditability in bankruptcy, so much so that the economic team had to perform Herculean feats in order to get the IMF to resume discussions.
The proposal, as introduced by Senator Ramon Alburquerque, provides enormous tax incentives for the entire Dominican industrial sector, including the exoneration of the exchange commission, the selective consumer tax and the VAT taxes (or ITBIS) on all imported capital goods, including raw materials, machinery and installations. The powerful sugar industry wants the 25% tax on products using the HFCS to be maintained in order to protect their sugar cane production when trade is liberalized with the US.