Donald Guerrero: some tax incentives will be cut
Hacienda Minister Donald Guerrero in a talk with economic editors on Monday, 20 February 2017, had commented on the recommendation of the International Monetary Fund for the Medina government to implement fiscal adjustments in order to maintain the present robust economy.
As reported in Diario Libre, Guerrero remarked that the government is contemplating fiscal adjustments that would focus on the elimination of tax exemptions and improvements in the efficiency of tax collections.
“We do not dismiss the IMF’s remarks. We share the view that the country needs to strengthen its tax base. The difference we have with the position of the IMF is that we know that once the construction of the Punta Catalina plant is completed, resources that during the last years have been transferred for its construction, that have reached 1% of the GDP, will then be available to strengthen the government’s fiscal capacity.
“It would be irresponsible on our part to sit down to negotiate a Fiscal Pact to add taxes if we are not able to administer them,” said the minister of finance.
During the meeting with the economic press, Guerrero said that the government contemplates changes in fiscal exemptions that he said today are 6.4% of GDP. He said many of the tax incentives have already served their purpose. He specifically mentioned Films Incentives Law 108-10. He said the intention is to maintain the same tax levels and rules, while increasing the government ability to monitor tax revenues to ensure that exemptions are granted where they correspond.
He also mentioned the elimination of the capacity to issue shares to holders that he described as a tax loophole, and an element he said needs to disappear in the Dominican Republic.
Furthermore he mentioned to increase tax revenues, the government plans to implement a central database to record all operations of betting shops and gambling.
He said he is confident these controls would allow a reduction of the fiscal debt to 2.3% of GDP this year that would be acceptable. He does not believe the foreign debt taken on by the country is unsustainable. As reported in Diario Libre, on the contrary, he described the Dominican Republic’s debt position as “worthy of envy.”
Guerrero reported that at the end of last year non-financial public sector debt (SPNF) stood at US$26,757.3 million, equivalent to 37.4% of GDP. He added that only 18.7% of the total debt has a variable interest rate, so he dismissed claims that the interest rate increases reportedly planned by the US Federal Reserve for this year will generate too much pressure on the Dominican debt service.
Guerrero told the press that the government has not decided how to utilize the Odebrecht agreement that sought compensation for the US$92 million in bribes paid to secure contract work. Odebrecht agreed to a US$184 million payment over eight years.
In response to Guerrero’s statements, the president of the National Business Council, Pedro Brache observed that the public debt is and will always be a concern until such time when the country generates enough revenue to meet its financial commitments – then and only then, will the level of foreign debt be considered to be sustainable.
The president of the Association of Young Entrepreneurs (ANJE), Eugene Rault Grullón disputed the 37% public debt figure mentioned by Guerrero and said that this is more than 50% when the financial public debt sector is included. He observed in the short term the public debt may be sustainable, but not so in the medium or long term. He called for a ceiling to the accumulation of public debt, “because we and our children will end up paying this.” He said that the idea that the public foreign debt is “worthy of envy” is a perception of Guerrero, but for ANJE it is not worthy of envy.
Source: DR1, DiarioLibre
Feb 25, 2017
Category: DR News |