Tax Reform In The Dominican Republic

Tax Reform In The Dominican Republic

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It can be said that the word reform has the meaning of modifying or remaking something, and when we talk about tax reform, we are talking about a change in the tax legislation of a country.

All tax systems have gone through a series of reforms in this area over time, in order to meet certain objectives such as strengthening the economic capacity of a State and contribute to greater public spending.

The Dominican Republic, for almost 10 years, has carried out several fiscal reforms, which have implied the incorporation of new taxes or certain increases in tax rates.

The 1992 reform brought with it the elimination of exemptions and incentives and in some way modernized the tax system up to that time.

In 2005, with the enactment of Law 557-05, an attempt was made to strengthen and increase internal revenue collection.

In 2007, a tax amnesty was given through Law 183-07 for taxpayers whose debts were prior to fiscal year 2006.

While in 2011, Law 139-11 was published, which established a tax with a simplified regime for the payment of income tax to casinos in order to finance increased spending on education.

Likewise, in 2012, Law 253-12 was approved, the purpose of which was to increase tax pressure and collect a greater amount of revenue.

Currently, due to the pandemic caused by COVID-19, public spending has increased as a result of the health emergency measures with which the government of the day has had to respond. This, together with the low tax pressure, that is to say, the ratio of tax revenues to the Gross Domestic Product (GDP), which already stood at approximately 14% in the Dominican Republic according to the Internal Revenue Service (DII) and the drop in current revenues of RD$48,716.2 million in the first nine months of 2020, has led to a new fiscal reform for 2021.

Thus, in October 2020, it was proposed in the draft of the General State Budget for 2021, an incorporation of tax measures such as a tax on extraordinary profits of companies with 8%, new levies on Liquefied Petroleum Gas (LPG), broadening of the tax base and increase of rates for commercial banks, the levy with 3% of the purchase of dollars, taxation of digital services and higher taxation of individuals.

However, although the government had to backtrack on these possible measures, since they were not incorporated in the budget, due to the critical situation of the economy of the Dominican Republic, a review of the tax structure imposed so far will be imminent, in order to update the tax scheme.

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