Conflict with Honduras

Finance Minister Vicente Bengoa said that a decree issued by President Leonel Fernandez that eliminates the requirement that Honduran cigarettes entering the DR be stamped in order to resolve the conflict with British Tobacco. The company had pointed out that the precondition was in violation of trade agreements in effect. Bengoa said that a judgment of the World Trade Organization whereby the DR is required to eliminate its exchange commission will not be put into effect until two years from now, which he says will give sufficient time so that the elimination of that tax does not affect government finances.

On 13 October of last year, Honduras had accused the DR before the World Trade Organization of discriminatory trade practices and demanded the elimination of the obligation to stamp the cigarettes in national territory and the 2% exchange surcharge. The exchange tax represents more than RD$16 billion in revenues for the government. From January to July 2004, it brought in RD$9.24 billion in revenues. The government contemplates increasing it to 13% as per an agreement with the IMF.