SANTO DOMINGO.- The Dominican Confederation of Micro, Small and Medium Construction Companies Inc. (Copymecon) proposed in the public hearings held yesterday in the National Congress that the tax exemptions for construction MSMEs and entrepreneurial sectors be offered two years of grace to enter the formal regime and not as proposed in the tax modernization project presented by the Executive Branch.
He pointed out that the project establishes that small and medium-sized enterprises pay based on 40% and 60% of the income of the period, respectively.
Eliseo Cristopher, president of the construction SMEs, also suggested that the tax reform be done through a fiscal pact, where all social and productive sectors of the nation are involved.
He argued that this proposal takes into consideration the vulnerability and development of MSMEs, a sector that impacts the development and stability of local economies and forms part of the majority of the economic and business fabric in the country.
“Because the country’s business fabric is mostly made up of MSMEs, more pronounced in the construction sector, and considering the existing levels of informality, there are reasons why most of them cannot cope with the tax burden due to their high level of economic vulnerability,” he explained.
He stated that the construction sector should receive preferential treatment in the area of affordable housing, given the significant housing deficit and the economic and social impact of these projects. “Therefore, we also propose a specialized system for construction projects undertaken by micro, small, and medium-sized enterprises (MSMEs), as previously mentioned.”.
Imbalance
Eliseo Cristopher. (External source).
Cristopher said that since its inception, Copymecon has advocated for a more efficient tax system, so he understands that the main reason for tax reform is the existing imbalance between government spending and revenue.
In that regard, he considered that the tax reform must be comprehensive, addressing all aspects of the country's tax system, and tackling the problem of tax evasion and avoidance, since currently income tax and ITBIS evasion exceeds 45% and other agents avoid paying taxes.
"In addition to being comprehensive, this must be progressive, meaning that those who earn more should pay more, in proportion, and that the tax burden should not depend so much on indirect taxes, since these by their nature are regressive or counterproductive.".
He opined that the Dominican Republic's budget is mostly dedicated to salaries and contributions, public debt payments and fiscal sacrifice or spending, so very little of the national budget remains for capital spending or infrastructure.
“Our proposal is a review of current spending. For example, when we look at the functions of the State's organizational structures, we observe that there are institutions with very similar functions, which creates overlap and duplication of functions, therefore, a lack of coordination and a waste of resources. It has also been observed that in many institutions, the majority of the budget is used for current spending or payroll,” he stated.
Review of laws
Copymecon believes it is imperative that the country undertake a serious review of all tax incentive laws, which have long favored various sectors of the national economy, significantly limiting government revenue. “While some exemptions are necessary, others have had counterproductive results. Therefore, many of these exemptions should be reviewed and targeted, but never generalized,” they emphasized.
Foreign investment
Copymecon believes that the Dominican Republic has fostered a highly receptive environment for international investments, adopting policies to minimize bureaucratic procedures and offering significant tax incentives as well as free assistance.
“In that sense, we understand that the country must create and strengthen trust and credibility, guarantee the rule of law, legal guarantees and openness so that fresh capital from foreign investors continues to flow and arrive in the country, generating growth and well-being in the nation,” he said.
He emphasized that the Dominican Constitution grants the same rights to foreign investors as to nationals and requires the same duties from them, and Law 16-95, on Foreign Investment, enacted on November 20, 1995, expressly recognizes that foreign investment contributes to the economic growth and development of the country.
“This favorable behavior of foreign investment contributes positively to foreign exchange earnings in the Dominican Republic, representing 11.57% of a total of USD 11,069.3 million received for this concept during January-March 2024.”.
