Internal Tax Changes Have Positive Impact on Commerce According to Doing Business Report

The changes put in effect under the General Internal Tax Office to modernize the system to benefit taxpayers has had a significant impact on advances made in the Dominican Republic, according to the sixth edition of the World Bank´s Doing Business 2009 report.  

The country currently holds position 72 of 181 countries in this ranking, and it holds the second position in comparison with the other member countries of DR-CAFTA.

Wide-reaching tax-reform cuts cut taxes and improvements due to  the opening of trade resulted in a 13-point upgrade in the Doing Business Index, a first in the history of the report. Along with Colombia, the Dominican Republic is the only other country with the distinction.

The “Doing Business” Project seeks to analyze the investment climate and business regulations in 181 countries around the world. The indexes analyzed in this report are based on the investment climate in the participating countries, with a focus on the features that make up a favorable or unfavorable business climate, the establishment of businesses and competitiveness of national companies in the international market. These indices include factors related to the country´s fiscal, monetary and commercial policy, output of the labor and capital markets, capital flow, market structure in terms of property rights that ensure the trust and confidence of investors, among other things.

The three most important reforms laid out in the Doing Business report in general were: the increase of protection for investors on the part of Albania, the simplification of the establishment of businesses in Yemen and tax reform in the Dominican Republic, according to the Word Bank.

According to the report, the Dominican Republic is one of the main reformer countries in the region and the world. The DR occupies number 9 in the general index and number 1 in terms of reforms in the area of tax payment and easing payment transactions in various areas through its digitization process.  

In our case, the reduction in business taxes from 29% to 25% and the abolition of various taxes have helped improve the indicator for tax payments and consequently the Doing Business Global Index.

Big Challenges for 2009

In the World Bank´s Doing Business 2009 report, the Dominican Republic faces the challenge of positioning itself in the classification of the areas examined, such as: the establishment of businesses, transactions and licensing and business permits, protection of investors, tax payment, foreign trade, fulfillment of contracts and the closing of businesses.

The country did not show favorable results in 5 of the 10 categories where it ranked higher than the first 100 countries evaluated. But in comparison to 2008, it showed a slight improvement due basically to the reforms that have been undertaken with the establishment of businesses, registering of property, paying taxes and foreign trade. As was shown in the results, the category in which the country displayed its best showing was in the payment of taxes where it occupied the 72nd place,  up from 67th place with respect to the year before.

 The significant progress in the “Tax Payment” sub-index is mainly due to the drop in the number of payments, which was reduced to 74. Also, it is worth noting that our country is below the regional average in the rate of total taxes and number of payments, indicating a better average position in comparison with other countries in the region.

  Meanwhile, the most significant shift in Doing Business 2009 for the Dominican Republic was in the sub-index Time in hours, with a drop of 194 positions in comparison to the previous year. The country currently holds position 72 of 181 countries in this ranking, and it holds the second position in comparison with the other member countries of DR-CAFTA. The previous year the country held position number 4.

The Reality of Taxes in the Dominican Republic

The income tax structure for employed individuals in the Dominican Republic as well as the ITBIS is progressive. Approximately 93% of people residing in our country have exempt salaries. In the case of businesses, last year a fiscal reform reduced income tax from about 29% to about 25%, and also reduced taxes on tobacco and alcohol.  

Wanda Sánchez
Press and Information Services Unit
Department of Public Relations
Tel. 809-689-2181 Ext. 3580 / 2225
wsanchez@dgii.gov.do