|
Dominican Republic Revenues
The core of the government's fiscal problems lay on the
revenue side. Starting in 1970, revenues, as a percentage
of GDP,
steadily declined. These revenues hit a low in 1982, as
the
result of generous tax exemptions for industry. Many
economists
criticized the role of fiscal exemptions in the island's
industrialization because the government thereby forfeited
badly
needed revenues in favor of job creation. In 1983 the
government
introduced a 6-percent value-added tax and initiated a
number of
ad hoc taxes on international trade, licensing, luxury
items, and
foreign exchange transactions. These new taxes, however,
did not
make up for the loss of revenue that had resulted from the
low
rates of taxation on income and business profits.
A fundamental feature of the nation's tax system was
the low
level of taxes on income and profits. In 1985 income taxes
represented only 0.6 percent of GDP, well below the
average of 2
percent of GDP for all developing countries. Furthermore,
the
income tax was effectively regressive because it utilized
a flat
rate and allowed numerous exemptions. Most new
corporations,
generally the most dynamic, benefited from at least one of
the
many fiscal incentives, and these enterprises therefore
added
little to the public coffers. In 1987 taxes on income and
profits
accounted for 19 percent of total tax revenue. Because of
the
political strength of the local and the foreign business
communities, major reforms in this section of the tax law
were
unlikely
(see Dominican Republic - Interest Groups
, ch. 4).
In addition to personal and corporate income taxes,
goods and
services and international trade were also taxed. Taxes on
goods
and services equalled 36 percent of all taxes in 1987,
whereas
those on international trade had reached 43 percent, a
relatively
high share. Steep import tariffs and export taxes on
principal
commodities constituted the bulk of taxes on trade.
Dominican
authorities found taxes on imports and exports far easier
to
legislate and to collect than domestic taxes, despite the
fact
that they created numerous economic disincentives. Non-tax
revenues, such as government income from property and
other
equity, provided 12 percent of total revenues in 1987.
Data as of December 1989
|
