“Fuerza del Pueblo warns of RD$50 billion impact due to tax reform”

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Santo Domingo, D.R.– The People’s Force (FP) party, through economist Haivanjoe Ng Cortiñas, warned that the tax reform signed into law will transfer approximately RD$50 billion from the private economy to the treasury, in a context characterized by an economic growth slowdown, high food inflation, and a recent reduction in liquidity available to families and the economy.

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Ng Cortiñas explained that the main immediate economic effect of the tax reform will be to increase the State’s collection capacity through new taxes and higher tax burdens, at a time when for every RD$100 spent by the government, RD$90.0 are unproductive expenses and RD$10.0 are capital expenditures.

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“The RD$50 billion that the Government expects to collect do not appear spontaneously. They will come from households, consumers, and businesses. These are resources that will no longer be available for consumption, savings, investment, and job creation, but will instead pass into the hands of the State, which only spends them in an unproductive manner,” he stated.

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The economist pointed out that the approval of the reform comes 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 evidences a loss of dynamism in economic activity, making it counterproductive to take RD$ 50 billion from the private sector.

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Likewise, he indicated that food inflation reached 6.56% year-on-year, especially affecting middle- and low-income households, which allocate a greater proportion of their income to the purchase of essential goods.

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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 decreased by approximately RD$9 billion, while the money supply (M1), the main indicator of transactional liquidity in the economy, fell by nearly RD$16 billion.

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“When food is more expensive, the money in people’s hands decreases and the economy grows below its potential, imposing new tax burdens requires an extraordinary justification. The Dominican economy does not face a problem of excess growth or excess liquidity today; on the contrary, it shows signs of a slowdown in its pace of expansion,” he stated.

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The leader of the People’s Force maintained that part of the new tax burdens could gradually be passed on to the final prices of goods and services, generating additional pressure on the cost of living and affecting the purchasing power of households.

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He also warned that the reform increases compliance costs for companies and taxpayers, raising uncertainty for some productive sectors that will have to operate under a higher tax burden.

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In the economist’s view, the approval of the tax reform marks the beginning of a new stage for the Dominican economy, in which 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 welfare.

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“The taxes will begin to be collected immediately. The costs on the economy will also begin to be felt immediately. As of today, it is up to the Government to demonstrate that the extraction of RD$50 billion from the private economy will generate benefits greater than the costs that families and productive sectors will have to assume,” he stated.

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Finally, Ng Cortiñas maintained that the true evaluation of the reform should not be based on the amount collected, but on its impact on the lives of Dominicans.

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