Bloomberg News

Protests Planned as Dominican Republic Prepares to Raise Taxes

November 06, 2012

The Dominican Republic’s congress will vote on tax increases today, amid protests that people are being forced to pay for government profligacy that has pushed up the fiscal deficit.

President Danilo Medina’s package of tax changes, which would increase government revenue by about 2 percent of gross domestic product, includes plans to raise the national sales tax to 18 percent from 16 percent. The bill was approved by a 30-0 vote in the senate on Nov. 2 and will need the support of 127 of 190 deputies today.

The tax overhaul, referred to by Medina as “a bitter pill to swallow,” was drafted to pare the fiscal deficit, which Economy Minister Temistocles Montas forecasts will widen to as much as 8 percent of GDP this year from 2.4 percent in 2011. Opposition groups say much of that increase was due to excessive government expenditures prior to the May 20 presidential election by the ruling Dominican Liberation Party. They are planning marches in the capital starting at 9 a.m. today.

“Taxes on fuel and the increase in sales taxes are going to make the production and transport of food, services and practically all goods consumed more expensive,” opposition groups Movimiento Justicia Fiscal and Foro Social Alternativo said in a joint e-mailed statement. “If the tax package is approved, poverty will increase and there will be more hunger and misery.”

Leaders of the opposition Dominican Revolutionary Party, which holds 77 seats in congress, have stated that the party will unanimously vote against the package.

Medina’s election and the move to narrow the deficit have helped Dominican dollar bonds return 20.4 percent this year, the best performance among 12 Central American and Caribbean countries in JPMorgan Chase & Co.’s CACI index. The country’s $57 billion economy should grow 4 percent this year, central bank president Hector Valdez Albizu said on Oct. 23, after expanding 4.5 percent in 2011.

To contact the reporter on this story: Adam Williams in San Jose, Costa Rica at awilliams111@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.


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