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Taxing interest on savings doesn’t jibe with Banks

Santo Domingo.- A proposed tax on interest earned by individual savings accounts doesn’t jibe with the Banks Association (ABC), which warns that if implemented, would be more harm than good.

Moreover, penalizing savings with 10% strengthens the informal market and spurs the flight of capital, as would lead savers to convert their pesos into dollars.

On its website, the Banks Association states that while a tax on savings would generate revenue, they’ll be too small and insignificant to offset the costs associated with its implementation.

For Latin American Banks Federation (Felaban) president Oscar Rivera, a tax on savings would be a mortal sin. It’s absurd to penalize those who save.”

Quoted by diariolibre.com, ABC president Jose Manuel Lopez said the sector is subject to a high tax and quasi tax burden of over 60% of its annual profits and cites several taxes banks paid including 1% on productive financial assets.

For tax expert Edgar Barnichta Geara, “the government’s announced tax reform proposal placing levies on the interests of savers is creating unfair competition that will lead to discrimination where people will move their capital.”

According to the government’s tax reform draft, interest received by individuals from financial institutions regulated by the Monetary Authority, and the National Housing Bank and Savings and Loan Associations will be taxed at a rate of ten per percent (10%).

Barnichta said starting with a 10 percent tax on interest is very high, and the ideal would’ve been a selective consumption tax of 5% or 6%, but not like it’s being considered now, with the tax reform proposal.

He added that taxing perceived interests, but leaving the Central Bank exempt means that people will move their capital from commercial banks to the Central Bank, which offers the highest interest.

Source: Dominican Today

Category: DR News |

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Last updated December 6, 2016 at 12:34 PM
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