The match Power of the People (FP), through the economist Haivanjoe Ng Cortiñaswarned that the tax reform converted into law, it will transfer approximately RD$50,000 million from the private economy to the treasury.
This occurs in a context characterized by a slowdown in economic growthhigh food inflation and a recent reduction in liquidity available to families and the economy.
Ng Cortiñas explained that the main immediate economic effect of the tax reform will be to increase the collection capacity of the State through new taxes and higher tax burdens, in times when, of every RD$100 spent, RD$90.0 are unproductive expenses and RD$10.0 are capital expenses.
“The RD$50,000 million that the Government hopes to collect do not appear spontaneously. They will come from the homes of consumers and companies. They are resources that will no longer be available for consumption, savings, investment and job creation to pass into the hands of the State, which only spends them in an unproductive manner,” he expressed.
The economist pointed out that the approval of the reform occurs at a particularly sensitive time for the dominican economy. He recalled that the most recent year-on-year economic growth stands at 3.8%, below the potential growth rate estimated between 4.5% and 5%, which shows a loss of dynamism in economic activity, making it counterproductive to extract RD$50 billion from the private sector.
Likewise, it indicated that food inflation reached 6.56% year-on-year, especially affecting households in middle and low incomewho allocate a greater proportion of their income to the purchase of essential goods.
Ng Cortiñas added that the most recent monetary indicators also reflect signs of lower liquidity in the economy. He explained that between May and the first days of June the money in people’s pockets was reduced by approximately RD$9,000 million, while the circulating medium (M1), the main indicator of transactional liquidity of the economy, decreased by close to RD$16,000 million.
“When the food are more expensive, the money in people’s hands decreases and the economy grows below its potential, impose new tax burdens requires an extraordinary justification. The Dominican economy today does not face a problem of excess growth or excess liquidity; On the contrary, it shows signs of decline in its rate of expansion,” he said.
The leader of the People’s Force maintained that part of the new tax burdens could be gradually transferred to the final prices of goods and services, generating additional pressures on the cost of living and affecting the purchasing power of households.
He also warned that the reform increases compliance costs for companies and taxpayers, increasing uncertainty for some productive sectors that will have to operate under greater tax burden.
In the economist’s opinion, the approval of the tax reform marks the beginning of a new stage for the Dominican economy. At this stage, society will have to evaluate whether the costs assumed by the population and the economy produce proportional results in terms of economic growth, employment and social well-being.
“Taxes will begin to be collected immediately. The costs on the economy will also begin to be felt immediately. Starting today, it is up to the Government to demonstrate that the extraction of RD$50,000 million from the private economy will generate benefits greater than the costs that families and productive sectors will have to assume,” he stated.
Finally, Ng Cortiñas maintained that the true evaluation of the reform should not be carried out by the amount collected, but by its impact on the lives of Dominicans.
