Economists raise the multiple variables that could affect the country if the project is approved.
SANTO DOMINGO.- Representatives of national sectors will attend the public hearing at 10:00 am this Thursday, October 17, convened by the Chamber of Deputies, to hear their opinions and proposals regarding the Fiscal Modernization bill, presented last week by the government and currently being studied by the Lower House.
Although the Finance Committee of that chamber, in charge of studying the project, has heard from more than 10 delegations of businesspeople this week, including the construction sector, today the doors of the National Congress will be opened to receive the various social sectors that wish to raise their concerns and proposals on the bill authored by the Executive Branch, through which the government seeks to collect RD$122,486.6 million annually.
"Participants who wish to make presentations must submit their papers in writing or in digital format, either before or on the same day as these public hearings," said the chairman of the committee, Representative Francisco Javier Paulino.
Alfredo Pacheco, president of the Chamber of Deputies, said yesterday, after Wednesday's session concluded, that today's session has a start time but no end time. According to Pacheco, the congressmen will work "without a set end time" to allow all registered participants sufficient time to express their concerns about the tax reform and their suggestions for changes, including those who have already attended and who will be able to speak again.
What economists suggest
Some specialists have raised concerns about the adverse economic consequences that the project could have for the country, including inflation, devaluation of the peso, and a decrease in foreign investment, among other points.
In the case of inflation, the increase in taxes on goods and services could be passed on to final prices, generating a generalized increase in the cost of living; regarding the devaluation of the peso, economic uncertainty and the possible outflow of capital could put downward pressure on the value of the Dominican peso against other currencies, according to one of the economists consulted by El Inmobiliario, who asked to remain anonymous.
He argues that one aspect considered a threat to real estate development would be the reduction of foreign investment, with the elimination of tax exemptions that could lead to the Dominican Republic becoming less attractive to foreign investors, who might seek markets with more favorable tax conditions.
"The slowdown in key sectors such as tourism, construction and el inmobiliario, which have been important drivers of economic growth, could be due to the elimination of tax incentives and the increase in operating costs," he noted.
He discussed the decline in economic growth and the rise in unemployment, noting that the combination of these factors can lead to an economic contraction, negatively impacting Gross Domestic Product (GDP) growth and increasing unemployment rates.
“In short, although the reform aims to increase tax revenues, the negative effects on the economy could offset these benefits. The economic contraction resulting from inflation, the devaluation of the peso, the reduction in foreign investment, and the slowdown in key sectors could lead to decreased economic growth and increased unemployment,” the specialist stated.
Selective elimination or gradual dismantling that depends on the progress in development is the methodology that Francisco Taveras, economist and professor at the Autonomous University of Santo Domingo (UASD), considers prudent when dealing with incentives, taking into account that in the same way that there are well-developed tourist enclaves, the Dominican Republic still faces challenges in the Northwest and Southwest lines.
“Public investment can be an ally to private investment, and incentives shouldn't be limited to taxation alone. Further incentives can be provided through improved public services, the development of good infrastructure, and raising the level of education in tourist areas.”.
For his part, Magin Díaz, former director of the General Directorate of Internal Taxes (DGII), suggested this week developing a gradual 10-year plan to carry out the changes that, in his view, the Real Estate Property Tax (IPI) requires.
He explained that this is a tax that needs to be modified, since it only collects 0.1% of the Gross Domestic Product (GDP), while in other Latin American countries it represents almost 1%.
