Thursday, May 06, 2004

DR: A breath of fiscal sanity might soon be blowing

The Dominican Republic is now looking at a “flat tax” similar to what has been proposed in the United States. Businessmen and politicians are looking to universalize the VAT (ITBIS) consumer tax, reduce the VAT from 12 to 10% and reduce income tax from 25% to a flat 10%, reduce import taxes to a maximum 10% and keep this scheme for 10 years. The formula 10-10-10 has been looked at inside the PLD party, and also proposes the elimination of the much hated 1.5% tax on anticipated earnings, the 0.15% tax on checks, the 2% surtax on imports, the 5% surtax on exports and the 10% exchange surcharge. Also being looked at are the taxes that impede capital accumulation, especially with regard to dividends and interests. Economist Frederic Emam-Zade defended the proposal by stating that the way to balance the government’s finances was not by increasing taxes, but by reducing the government payroll and saving as much as US$600 million a year.
If the government is really serious, they should eliminate the VAT and income tax and just impose a 10% flat tax and watch the country's economy fly.

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