Proposed advance on income tax violates Constitution

Tax consultants Edgar Barnichta and Felipe Hernández Paulus agree that the proposed advance on gross sales if passed by the government could be annulled by a Supreme Court ruling for being in violation of Art. 9E of the Constitution. The Federación Dominicana de Comerciantes, a leading merchants organization, holds this position and has said that if the bill on the advance tax is passed, they would take their case to the Supreme Court. Barnichta explains that losses cannot be taxed. Consultant Felipe Hernandez said that a tax of this kind would affect the cash flow of companies and would act like a straight jacket, as it would become a minimum tax on doing business. The government originally had proposed a 2% advance, then President Mejía said he would consider lowering it to 1.5%. The government also agreed to exempt companies selling up to RD$2 million a year from the tax. Hernández said that to get around it many companies would split up to qualify for the exemption.