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Dominican Republic Approves Tax Package to Trim Swelling Deficit

The Dominican Republic’s Congress approved a series of tax changes today in an attempt to trim a fiscal deficit forecast by the Economy Ministry to reach 8 percent of gross domestic product this year.

The tax overhaul, which triggered protests outside Congress today, was approved by 103 of the 174 legislators present in a second-round vote, according a statement published on the congressional website. The bill will now be sent to President Danilo Medina to be signed into law, and the majority of the new taxes will go into effect next year.

The tax changes will increase the national sales tax to 18 percent from 16 percent and raise levies on several products, including tobacco and alcoholic drinks. Paired with government spending cuts that accompany the package, the tax changes will reduce the fiscal deficit by as much as 4 percent of GDP in 2013, Medina said on Oct. 4.

“The only option that the government has at this time to satisfy the social demands without further going into debt are new taxes,” Economy Minister Temistocles Montas said in a statement published on the ministry’s website today.

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: Bill Faries at wfaries@bloomberg.net.

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